Five mortgage advantages for first-time homebuyers

There’s no getting around it—it’s an exciting time to be a first-time homebuyer. Below, we outline five advantages that every first-time buyer should know as they apply for a home mortgage loan.

1. Down payment options

For many buyers, saving for a down payment can be one of the largest hurdles in achieving homeownership. Fortunately, there are a number of down payment options and even some assistance programs available for first-time buyers in both Minnesota and western Wisconsin.

You may also be able to take advantage of a mortgage savings account by planning in advance. And if you have generous relatives, mortgage gift funds may be another option.

Ask your REALTOR and lender for more information on the availability of down payment programs and options in your area.

2. FHA loan options

Federal Housing Administration (FHA) offers government-backed loans that can benefit first-time buyers and potential buyers by offering loans that require less than the traditional 20%. .

FHA does offer loans with loan limits that vary by market area and they adjust every year. Find the current FHA lending limit for your county.

3. Lowered mortgage insurance premiums on FHA loans

If you secure an FHA loan, you’ll pay mortgage insurance at closing and throughout the life of the loan. FHA mortgage insurance provides lenders with protection against losses incurred if a homeowner defaults on their mortgage loan. The lenders bear less risk because FHA will pay a claim to the lender in the event of a homeowner's default. Loans must meet certain requirements established by FHA to qualify for insurance.

The good news is that the FHA lowered the annual mortgage insurance premiums from the previous rate of 1.35% to .85%. Experts predict that this saves the average FHA borrower around $80 per month. For example, borrowers with a loan amount of $200,000 will save approximately $900 annually with the reduced annual MIP.

4. Lower down payment options on conventional loans

FHA isn’t alone in opening up borrowing options for credit-worthy buyers who can afford a mortgage but lack the savings to pay a substantial down payment. Mortgage giants Freddie Mac and Fannie Mae also offer mortgages with a down payment lower than the traditional 20%. .

To minimize risk and ensure responsible homeownership, Freddie and Fannie only offer this lower down payment option to those with good credit. If you are interested in these programs you may need to undergo additional requirements or financial verification with your lender.

Please check with your lender as program requirements may vary.

5. Low mortgage interest rates

Mortgage rates have been incredibly low for the past few years, and now is a great time to take advantage of those low rates.

How important are these low rates to first-time buyers? Extremely. If interest rates were to increase even one percent from today’s rates, a borrower’s buying power could be reduced by 10 or 11 percent.

Reach out to a mortgage consultant regarding current interest rates.

What happens next?

If you’re ready to enter the market for the first time, reach out today and our local experts will get you on your way.