A couple moving into their new home

A guide to first-time homebuyer loans

Are you ready to start the journey toward owning your very first home? We want to help by sharing some options for first-time homebuyer loans. In this blog post, we’ll explore home loans with low down payment requirements, flexible credit qualifications and reduced mortgage insurance costs.

What’s a first-time homebuyer?

First-time homebuyer mortgage programs offer several benefits that can make it easier and more attainable for individuals and families to purchase their first home. You might still qualify as a first-time homebuyer even if you’ve owned a home before if you meet the following criteria: You’re purchasing the security property, you’ll reside in the security property as a principal residence and you’ve had no ownership interest (sole or joint) in a residential property during the three-year period preceding the date of the purchase of the security property. In addition, an individual who is a displaced homemaker or single parent also will be considered a first-time homebuyer if they had no ownership interest in a principal residence (other than a joint ownership interest with a spouse) during the preceding three-year time period.

Qualifications for first-time homebuying mortgages

If you’re looking to buy your first home, there are a few things to keep in mind when applying for a home loan. Each type of first-time homebuying mortgage has specific requirements, but here are some general qualifications to consider:

Credit score

Your credit score measures your ability to repay your debt and ranges from 300 to 850. A higher score shows you’re more likely to make your monthly mortgage payments on time and can improve your approval chances. However, you don’t need a perfect score or a credit score at all. Credit scores as low as 540 may qualify for some first-time homebuyer loans. Homeownership is also possible with our Complete Rate program. The program analyzes consistent income deposits and payments, including rental payment history, to provide a better interest rate to customers with no traditional credit score.

Income and employment

When you apply for a mortgage, you must show you have a reliable way to make your monthly payments. Providing details about your employment history and income by submitting pay stubs, tax returns and proof of employment can help confirm that you’re a dependable borrower.

Debt-to-income ratio (DTI)

Your debt-to-income ratio (DTI) compares monthly debt obligations to gross monthly income. Why does this number matter? Your DTI ratio is a key indicator of your financial health and how much home you can afford.

Down payment

Did you know you don’t need to put 20 percent down on a home to qualify? Typically, first-time homebuyer programs offer zero and low down payment requirements, so you won’t have to worry about saving up a substantial amount of money upfront. To see how the amount of your down payment affects the affordability of your monthly mortgage payment, try out different scenarios with our mortgage payment calculator.

Savings and assets

The amount of cash you’ve saved shows your ability to manage loan payments, pay closing costs and cover unexpected expenses.

These are general qualifications. Connect with a loan officer to learn more about the first-time homebuyer loans that may suit your financial situation.

Down payment assistance for first-time homebuyers

Down payment assistance (DPA) programs are here to help first-time homebuyers like you increase their buying power. They’re ideal for those borrowers who can manage monthly mortgage payments but don’t want to wait to save up for a down payment.

You can find DPA programs offered by state or local governments, as well as other organizations aiming to support first-time homebuyers. These programs can help ease the initial financial pressure of buying a home and may even cover some closing costs. And if the assistance comes as a homebuying grant, you won’t have to repay it.

Guild Mortgage’s loan programs for first-time homebuyers

We offer loan programs for first-time homebuyers designed to make homeownership more attainable. With zero and low down payment options, you can say goodbye to renting and hello to the benefits of homeownership.

  1. FHA financing: For borrowers with lower incomes and credit scores, owning a home is still within reach. With more flexible requirements, FHA loans are designed to be more accessible than other types of home loans. For example, you may only need a 3.5 percent down payment and have a credit score as low as 540. Even if you haven’t established credit, we can help!
  2. USDA loan: Are you looking to buy in a rural or suburban area? With USDA loans, you can enjoy benefits such as zero down payment requirements. Another advantage of USDA loans is their better-than-average interest rates, helping to reduce your long-term borrowing costs.
  3. VA loans: Designed to support veterans and active-duty service members, VA home loans have zero down payment options and allow you to qualify even if you have a limited credit history. If you’re eligible for a VA loan, you may also benefit from a lower interest rate than a traditional mortgage, helping to reduce your monthly mortgage payments. VA loans offer the option for no private mortgage insurance (PMI), decreasing your overall costs.
  4. Zero Down: For many first-time homebuyers, saving for a down payment is one of the first steps of the homebuying process and can take years. Our Zero Down program is an option to buy a home sooner without waiting to save. This program pairs a standard FHA first mortgage for up to 96.5 percent of the total purchase price, plus second mortgage options for your down payment and/or closing costs. The second mortgage provides down payment assistance of 3.5 to 5 percent of the purchase price as a repayable lien.
  5. Payment Advantage: Reduce your rate by one percent for the first year on us. Our Payment Advantage program allows you to lock in a Conventional loan, and we’ll pay one percent of your interest rate for one year with a lender-paid temporary buydown. After the first year, you’ll have a predictable payment increase and may be eligible to refinance through programs such as the Payment Protection program, which has no lender fees. For Payment Protection program full terms and conditions, visit www.guildmortgage.com/homebuyer-protection.
  6. Payment Advantage Plus: With Payment Advantage Plus, a 2-for-1 buydown program, eligible homebuyers can save even more. Payment Advantage Plus lowers your monthly payment for the first two years. When using a seller credit, your interest rate is two percent lower for the first year.* Then we’ll pay to lower the interest rate by one percent for the second year.
  7. 1% Down Payment Advantage: With 1% Down Payment Advantage, you can start your homebuying journey with as little as one percent down payment, and Guild will provide a two percent grant to make up your three percent down payment requirement on a conventional loan.** Plus, we’ve added Payment Advantage, where we’ll pay your interest rate down by one percent for year one.

First-time homebuyer loan next steps

Buying your first home is an exciting milestone. However, there are a lot of factors to consider. These nine tips for first-time homebuyers can help you navigate the process with confidence.

*The Payment Advantage and Payment Advantage Plus programs are a promotional offer from 11/10/2022 to 12/29/2023. The Payment Advantage program is a promotional primary purchase offer on a Conventional 1-year lender-paid temporary buydown. The Payment Advantage Plus program requires seller participation to provide a seller incentive to temporarily reduce the rate by 2% for the first year. The lender promotional offer will temporarily reduce the rate by 1% for either the first or second year of the conventional mortgage on conforming and high balance loan limits. The lender and seller-paid credit will fund the buydown escrow account, and the funds will be dispersed out of the buydown escrow account during the first 12 or 24 months of the loan.
**Guild Mortgage to cover 2% of the required minimum down payment amount in the form of a non-repayable grant with a maximum grant amount of $5,000. Changes to the loan parameters, including but not limited to the loan amount, owner-occupancy status, loan to value and other factors may render the borrower ineligible for the program. Eligibility is subject to the program guidelines. The grant may only be used for the borrower’s cash investment in accordance with the program guidelines. Must lock rate on or after 6/12/2023. Not available with any other discounts or promotions. Offer cannot be retroactively applied to previously closed loans or loans that have a locked rate.

The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.

Share this story, choose your platform!

About the Author: Guild Mortgage

Founded in 1960 when the modern U.S. mortgage industry was just forming, Guild Mortgage Company is a nationally recognized independent mortgage lender providing residential mortgage products and local in-house origination and servicing. Guild’s collaborative culture and commitment to diversity and inclusion enable it to deliver a personalized experience for each customer. With more than 4,000 employees and over 250 retail branches, Guild has relationships with credit unions, community banks, and other financial institutions and services loans in 49 states and the District of Columbia. Guild’s highly trained loan professionals are experienced in government-sponsored programs such as FHA, VA, USDA, down payment assistance programs and other specialized loan programs. Guild Mortgage Company is a wholly owned subsidiary of Guild Holdings Company, whose shares of Class A common stock trade on the New York Stock Exchange under the symbol GHLD.