First Time Homebuyers

You are thinking about buying a home for the first time, you have heard your real estate agent, friends or lender speak about First Time Home Buyers loans... FHA, Rural Housing, VA loans, HUD homes all of these terms really are confusing.  There are several programs available through the government to help you finance your first home.


Now, be aware that the term First time Home buyer is really just that... Agencies now a days don't actually provide money for first time home buyers; instead they facilitate programs that encourage banks and lenders to grant mortgages.

The FHA Loan

The Federal Housing Administration (FHA) provides what is probably the most popular home loan program for first time buyers. Rather than lending the money themselves, the FHA insures a loan made by a private lending institution. This insurance gives the lender a measure of peace in knowing that even if the homeowner defaults on the loan, they will not lose their investment. In such cases, the FHA steps in and pays the balance of the loan, then assumes ownership of the house and resells it.
An FHA loan is designed specifically for first time home buyers in the moderate to low income bracket. Requirements for FHA loans are less strict than those for a traditional fixed rate mortgage. FHA loans are so widely used in the housing industry that they are generally the first ones thought of when first time home buyers apply for a mortgage.

Housing and Urban Development Homes - HUD Homes

HUD Homes are properties offered to low income buyers through a program administered by the U.S. Department of Housing and Urban Development.  As is the case with the FHA loan, HUD does NOT actually loan the home buyer any money.  In fact, HUD doesn't even insure the loan.  A HUD home is acquired through an FHA backed mortgage issued by a private lending institution.  If the home buyer defaults on his mortgage, FHA pays the balance of the loan, then HUD acquires the home and resells it, usually at less than market value.  HUD homes are aimed at home buyers with limited income.

VA Loans

The Veterans Administration (VA) provides a loan program similar to that of the FHA program. Again, rather than loaning money themselves, the VA guarantees a loan made by a private lender. These loans are aimed at U.S. military veterans and their families. A VA loan can be acquired not only by a veteran, but also by a widow or widower as long as that individual does not remarry.
The main advantage of the VA loan is the fact that home buyers are not required to purchase private mortgage insurance or provide a down payment. VA loans are designed to help military personnel purchase homes in areas where financing options are limited.


The USDA Development Housing Loan - Rural Housing


The U.S. Department of Agriculture (USDA) offers yet another guaranteed loan program designed to help lower income first time home buyers purchase homes in rural areas. First time home buyers benefit from this program with no down payment, no mortgage insurance, and lower credit rating requirements to qualify. The USDA understands that first time home buyers in rural environments have additional financial challenges that need to be addressed in order to purchase a home. These USDA-guaranteed loans fit the bill perfectly.

The four types of federal first time home loan programs listed here are but a small sampling of what is available. Various state governments also offer low interest mortgages for first time home buyers, as do some larger cities and counties. Your real estate agent and mortgage broker should be familiar with the government backed loans available in your area. They'll be happy to work with you to acquire the best financing for your needs.