By Matt Allen
Vice President, Portfolio Lending (NMLS #415037);

How to Qualify For A Home Loan as a First-Time Home Buyer

Jul 15, 2022

  • First-Time Home Buyer
  • Non-QM Loans
  • FHA Loans
  • Portfolio Loans
  • Non-conforming Loans

If you're deciding it's time to take the plunge and buy that first house, there's good news for you. First-time home buyers can take advantage of special mortgage products and programs with flexible guidelines to help make it easier. However, specific qualifications will need to be met for each.

First-time home buyer programs

Fannie Mae and Freddie Mac offer programs for first-time and repeat home buyers, with qualifications for each:

HomeReady Mortgage - This program offered by Fannie Mae allows for down payments as low as 3%. It requires a minimum 620 credit score, a debt-to-income (DTI) ratio no higher than 50%, and can have up to 97% loan-to-value (LTV) ratio. Your annual income is limited to 80% or less of the area's median income, and mortgage insurance is required if the LTV is over 80%.

Home Possible Mortgage - Freddie Mac's Home Possible mortgage is very similar to HomeReady, but Home Possible allows for the down payment to come from outside sources if you are purchasing a multi-family unit. The requirements are also the same, except for a Home Possible mortgage needing a 660 minimum credit score.

NASB offers both the HomeReady and Home Possible mortgage products as well as these NASB products and programs that can benefit first-time home buyers:

Good Neighbor Program - The Good Neighbor Loan Program is available for properties in low-to-moderate income census tracts in the Kansas City metro area. This program is also available for properties in the KC Metro, regardless of the census tract of the property, if the applicant's household income does not exceed 80% of the median income level for the MSA (Metropolitan Statistical Area). This program includes no lender fees, plus a lender credit for closing cost assistance.

First-time home buyer loans

There are several loan programs available that first-time home buyers can take advantage of, each with different qualifications:

FHA Loan – One of the most popular loans for first-time home buyers, this Federal Housing Administration-insured loan allows borrowers to purchase a home with a minimum credit score of 580 with as little down as 3.5%.

VA Loan – If you or your spouse meet the minimum service requirements set by the Department of Veterans Affairs (VA) and have a Certificate of Eligibility (COE), it may be a great option. These loans come with lower interest rates compared to other loans and do not require a down payment or mortgage insurance. Some lenders may charge an origination fee or application fee (NASB does not1), and the loan cannot be used for a vacation home or rental properties.

Non-Conforming Loan – Getting a mortgage loan can be difficult when you don't meet conforming loan requirements. Certain life circumstances; a change in income, job loss, bankruptcy, or short sale – can often make it hard to obtain a home loan. Sometimes called portfolio or non-QM loansnon-conforming loans are available for these borrowers. Requirements include at least one year of self-employment, a minimum credit score, loan amount limits, a satisfactory rental history, and a 20% down payment. Interest rates tend to be a little higher for non-conforming loans as well.

In addition to qualifying for a loan, the first-time home buyer needs to consider saving for the associated fees. In addition to the down payment (if applicable), You should expect to pay 2% to 5% of your total loan value in closing costs. If your loan is worth $250,000, you may pay between $5,000 to $12,500 in closing costs. Here are other things you can do to prepare for your first home purchase.

For more information for first-time home buyers, click here or contact the experts at NASB at 855-465-0753. We were voted the best lender for First-Time Home Buyers for 2021 and 2022 by NerdWallet.

1NASB does not charge lender fees on VA loans; however, fees payable to third-party service providers are still required, including a VA funding fee if applicable.