The decision to purchase a home for the first time may be the most pivotal financial choice an individual can make. First-time home buyers may feel that they are at a disadvantage when compared to those who have previously owned a home, but there are actually quite a few programs that are designed to assist them. First-time home buyer loans are the perfect opportunity for individuals who may not qualify for traditional home loans and have limited funds for a down payment.

What First-Time Home Buyer Loans?

First-Time Home Buyer LoansFirst-time home buyer loans are mortgage programs designed for circumstances that individuals who have never previously purchased a home typically have. Generally speaking, these loans permit higher loan-to-value ratios for approval (LTV). First-time home buyer programs generally give it’s buyers favorable terms and advantages not available through other programs.

Today’s First-Time Home Buyer Demographics

According to the National Association of Realtors (NAR), first-time home buyers make up approximately 40 percent of all home buyers. First-time buyers tend to be young, with a average age of 31 years old, and their median annual income is about $60,000.
The average home size that first-time home buyers purchase is typically around 1,600 square feet with an median cost $154,000. The average down payment for first-timers is 4 percent, and most first-time buyers use savings or a loan from family to fund it.

What Kinds of First-Time Buyer Home Loans are Available?

In today’s lending climate, there’s a lot fewer first-time buyer home loan programs than in past times. These three programs are particularly popular:

Federal Housing Administration (FHA) Loans

Choosing a MortgageFHA loans are designed for individuals who may have low credit scores (as low as 580) and need less stringent qualifications for their loan. They are also meant for buyers who have less than 20 percent home equity or down payment. The down payment on an FHA loan can be as little as 3.5 percent. They generally have 15, 20, 25 or 30 year terms. Learn more.

Veterans Affairs (VA) Loans

VA home loans are reserved for active-duty military, veterans and their families. A VA loan can be obtained with no down payment, and there is no monthly Private Mortgage Insurance (PMI) payment required. Individuals with credit scores as low as 620 can participate in the VA home loan program. They typically have 15, 20 and 30 year terms. Learn more.

USDA Rural Development Loans.

USDA loans enable home buyers to get a 100 percent financing mortgage with a low interest rate.  The only catch is that the home must be in an approved rural area (which most of the U.S. is). USDA loans have terms lengths of 30 years and can be obtained by applicants with credit scores as low as 620. Learn more.

What Are the Pros and Cons of First Time Home Buyer Loans?

As with any financial decision, the decision to take advantage of first-time home buyer programs has pros and cons. Here is an overview.


  • They require little or no funds for a down payment.
  • They’re well-suited to individuals with lower credit scores and require less stringent loan qualifications.
  • They have low interest rates.


  • They may penalize individuals who sell their home shortly after purchasing it.
  • They may include higher fees and closing costs than lower LTV loans.
  • While first time buyers may not have to pay PMI to a bank, they may have to pay for mortgage policy provided by the loan program itself.

Individuals who are considering buying their first home may find the process daunting at first. There are considerable resources out there for first time home buyers, however, as well as special loan programs. A counselor from the U.S. Department of Housing and Urban Development (HUD) potentially can be helpful and can provide sound advice for millennials. It’s true that homeownership can sometimes seem to be beyond all reach, but the truth is that there are more opportunities for first-time buyers than there have been in years.

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