Skip to content

10 Best Ways to Get First-Time Home Buyer Loans with Bad Credit and Zero Down

First-Time Home Buyer Loans

First-time home buyer loans can help to make your home ownership goals a reality. We’ve collected some of the best national loans for first-time home buyers that can help you get to your first home with zero down payment.

Buying a home is so difficult, that they should make it an Olympic event. It’s not just paperwork; This is the terminology, fees, and a number of people involved. It’s normal to want to agree on anything, sign everything, and finish the process as soon as possible.

While this may make you a medalist in downhill skiing, it will not give you many style points in the ups and downs of financial well-being.

First-Time Home Buyer Loans with Bad Credit

Here are some of the most useful first-time home buyer loans and programs that you can ignore if you rush through the process. They can score you some big savings.

First-Time Home Buyer Loans with Bad Credit and Zero Down
First-Time Home Buyer Loans with Bad Credit and Zero Down

As a first-time home buyer loans, there can be many unknowns. Whether it’s the mortgage jargon, the types of home loan, or even the down payment requirements, the flood of new information can be overwhelming. We want to help you learn about some of the things that may go unnoticed as you prepare to buy your new home.

Types Of First-Time Home Buyer Government Programs

  • Federal Housing Administration or FHA loan
  • United States Department of Agriculture Or USDA loan
  • Veterans Affairs or VA loan
  • Native American Direct Loan
  • Down Payment Assistance or DPA Loan
  • Government-Backed Loans

1. Federal Housing Administration or FHA loan

Insured by the Federal Housing Administration, FHA loans generally come with a smaller down payment and lower credit score requirements than most conventional First-Time Home Buyer Loans.

First-time home buyers can buy a home with a minimum credit score of 580 and as little as 3.5 percent down, or a credit score of 500 to 579 with at least 10 percent down.

If you deposit less than 20 percent, you will have to pay for FHA mortgage insurance, which includes a 1.75 percent upfront fee and annual premiums.

2. United States Department of Agriculture Or USDA loan

The U.S. Department of Agriculture, or USDA, guarantees loans for some rural homes, and borrowers can get up to 100 percent financing (in other words, there is no down payment requirement). This does not mean that you have to buy a farm or live in a cabin with livestock, but you do have to buy a home in a USDA-eligible area.

3. Veterans Affairs or VA loan

Qualified members of the U.S. military (active duty, eligible veterans, and family members) can apply for First-Time Home Buyer Loans backed by the U.S. Department of Veterans Affairs or VA.

The Veteran Affairs or VA home loan are a great deal because they have lower interest rates compared to most other types of loans and do not require a down payment.

Borrowers, however, will have to pay a financing fee, but it can be built into their monthly loan costs. Some service members may also be exempt from paying this fee.

You May Read Also: Easy Tips To Get Hassle-Free Bad Credit Car Loans

4. Direct Loan

The Native American Direct Loan (NADL) provides financing to eligible Native American veterans and their spouses to purchase, improve, or build a home on federal trust land. This loan differs from traditional VA loans in that the VA is the mortgage lender.

5. Down Payment Assistance or DPA Loan

Not sure if you can cover the down payment on your own? You can also get Down Payment Assistance (DPA) through some specific types of First-Time Home Buyer Loans to reduce the amount you need to deposit.

Some options include second mortgages, deferred payment loans, and forgiven loans.

Loans structured like a second mortgage must be paid off at the same time as your primary mortgage.

Deferred payment loans must be paid in full when you move, sell, refinance, or pay off your primary mortgage.

Loans can also be forgiven for a set number of years but will need to be repaid when you move, sell, refinance, or pay off your primary mortgage if you move before the set number of years expires or if you violate the terms of the forgiveness.

6. Government-Backed Loans

Government-backed loans can get you a home with a low down payment or poor credit. The government ensures government-backed loans, which means that they pose less risk to a lender.

This also means that lenders can offer you a lower interest rate. There are currently three government-backed loan options: FHA loans, USDA loans, and VA loans. Each program has its own list of ratings.

You May Read: Personal Loan For Debt Consolidation With Bad Credit

First-Time Home Buyer Requirements

  • Buyer must be an individual (not a company or trust)
  • He or She must be over 18 years.
  • He or She must be a permanent resident of that country.
  • Either of the spouse of buyer must not have previously owned any residential property within the country.

What Are The Benefits Of First-Time Home Buyer Programs?

First-Time Home Buyer Programs
First-Time Home Buyer Programs

First-time home buyer loans, grants, and programs are a form of financial assistance for homebuyers, usually those who meet certain income restrictions and have strong credit scores. They can apply to those who have never owned a home, or those who have owned a home in the past, but have not owned one in the previous three years.

Here are a few different ways that you could benefit from these programs:

Grants: Some areas offer cash to go toward housing-related costs, such as a down payment or closing costs.

Closing fee assistance: Some loans put a limit on the amount charged for closing costs.

Deferred payments: Some First-Time Home Buyer Loans do not charge interest and do not need to be repaid until the homeowner sells the home, refinances, or cancels the mortgage.

Interest Savings: Some organizations offer to pay or subsidize mortgage interest, or help borrowers qualify for lower interest rate loans.

Loan forgiveness: Homeowners who stay in the home for a certain period of time will have a portion of their debt canceled (although you may still be taxable).

Down Payment Assistance: Some programs allow home buyers to make a small down payment, or none at all.

Not all of these programs will be available in your area or for your situation. There are also certain restrictions, such as financial need, so do a little research or speak with a mortgage professional to see if you qualify.

First-Time Home Buyer Loans Process

Here are some common process you should follow step by step to get first-time home buyer loans and buy your dream home.

1. Calculate Your Budget

Being honest with yourself, your real estate agent, and your mortgage lender is key – you don’t want to end up with a home you can’t afford.

Find out how much you can afford each month, taking into account maintenance costs and leaving room for unexpected emergencies.

If you are shopping with a partner or spouse and each has an income, consider what would happen if one of those sources of income disappeared, either by choice or due to layoff or other unforeseen circumstances.

2. Get Quotes From At Least Three Lenders

Shopping is one of the most important steps in obtaining a mortgage. Compare all the terms each lender offers, including the APR, not just the interest rate, fees, and other closing costs.

3. Get Pre-Approved For a Loan

Once you decide on a lender, get your mortgage pre-approved before you start looking for a home. A pre-approval shows sellers that you are a serious buyer and will help you buy with confidence within a specific budget.

Be prepared for a lender to investigate all aspects of your financial life in order to pre-approve you for a loan.

4. Find a Good Real Estate Agent

Working with a real estate agent who knows the area in which you plan to buy will be of great help in your search.

You want an agent who can help you find the right home, negotiate the best deal, and recommend other professionals for any project you want to do once you move in.

5. Buy For Your Home

Make sure your agent really knows what you are looking for and research not only the houses you are going to see, but the neighborhood as well.

You May Read Also: The Best Easy Way To Getting a Small Business Loan For Startup

It is a good idea to visit the community you are moving to at different times of the day, weekdays and weekends, and talk to the neighbors, and never buy a home without seeing it. Also be sure to check the flood, earthquake, and fire hazard maps.

6. Make An Offer

Talk to your real estate agent about a reasonable offer and be prepared to exchange opinions with the seller. Today’s real estate market is very competitive, so you will probably have to negotiate with other potential buyers.

Still, it’s important not to blow your budget. At this stage, it’s easy to let your emotions take over. No matter how much you like a home, be prepared to leave if the numbers finally don’t work for you.

7. Negotiate Closing Costs

There are closing costs associated with any real estate sale and there are many ways to pay for them. They may carry over to your loan (which tends to be more expensive in the long run) or the seller may be willing to pay some of your fees.

Don’t ignore this part of the transaction; you may be able to negotiate your way to waived fees and lower costs overall.

8. Hire a Home Inspector

When you decide on a home you like and make an offer, have it thoroughly inspected. You want to make sure there are no structural issues or anything else that might affect the livability of your new place.

Inspections typically take a few hours and cost between a few hundred and a few thousand dollars, depending on the size of the home. However, the cost is worth it – giving up this part of the transaction would be a mistake.

9. Get Homeowners Insurance And Finalize Your Move-In Details

The mortgage lender often requires homeowners insurance to help protect your investment. As with your mortgage, get quotes from multiple companies or work with an insurance broker who can compare rates for you.

If your home is located in a federally designated flood zone, you will also need to purchase flood insurance.

Make sure you have the policy consolidated and the closing date in place. As you prepare for move-in day, contact your local cable, internet, and utility provider to schedule new service for your move-in date. Don’t forget the most important tasks: hire a reputable moving company and pack.

10. Seal The Deal On Closing

You will need to obtain updated pay stubs and other financial paperwork just before closing to show that your employment status has not changed and that you will be able to make your mortgage payments.

Typically, within 24 hours of closing, you will do a final tour of the property to make sure the repairs, if any, have been made and the home is empty. At the closing table, you will sign the paperwork to finalize the loan and transfer the home ownership from the seller to you.

You will also be asked to bring a cashier’s check made out to the escrow company. Don’t forget to bring your identification too. After signing the closing papers, you will be given the keys to your new home and you will be an official first-time homeowner.

First-Time Home Buyer Loans

Frequently Asked Questions (FAQ) about First-Time Home Buyer Loans

What loan is best for first-time home buyers?

FHA loans are great for first-time homebuyers because, in addition to lower loan costs and less stringent credit requirements, you can make a down payment as low as 3.5%.

Can you buy a home with no money down?

You can only get a mortgage with no down payment if you get a government-backed loan. Government-backed loans are insured by the federal government. There are currently two types of government-sponsored loans that allow you to buy a home without a down payment: USDA loans and VA loans.

Can you be denied a FHA loan?

There are three popular reasons you’ve been denied an FHA loan: bad credit, high debt-to-income ratio, and generally not enough money to cover your down payment and closing costs.

Who is considered a first-time home buyer loans?

If you’re interested in qualifying for a first-time home buyer loans program, most government and non-profit programs will consider you a first time if you haven’t owned a home in the last three years. However, check with your real estate agent if you have any concerns.

Which is the easiest first-time home buyer loan to get?

The best home loan program will depend on your financial situation. However, for most first-time buyers, an FHA-backed loan will be easier to obtain because its requirements are more lenient, allowing for lower credit scores and less stringent debt-to-income ratios than conventional home loans.