Mortgage options & special programs for first-time home buyers in Frisco

Mortgage Options_First-time Home Buyer | Judi Wright Team | Top Frisco Realtor

Apartment life was great, but feeling the need to put a stake in the ground – or maybe just a place to put steaks on the grill?

If you’ve been thinking about buying your first home, find out why Frisco is a great location for your first home in Part 1 of this 2-part series. In Part II below, we’ll give you an overview of different mortgage loan types and provide a list of special programs available for first-time home-buyers.

 

Do you need a 20% down payment to buy a home?

Many first-time home buyers delay buying their first home because they don’t have the money saved up for the big down payment. But that’s not your only option.

 

There are many types of loans and even special programs or grants available today for the first-time home buyer that offer lower down payment options. And many even offer lower interest rates or special incentives to help you cover the nut and get you into your first home.

 

Here’s a breakdown to help you uncover options that are best for you.

 

Mortgage types and down payment options

Most mortgages do not require a 20% down payment. There are many mortgages and programs designed specifically for first-time or lower-income home buyers. Here’s a breakdown:

 

Conventional Loans

If you have enough savings socked away for a 20% down payment, a conventional loan might be a good option depending on the lender and interest rate provided.

 

The 20% down payment will alleviate the need for PMI or private mortgage insurance. PMI helps protect the lender from losing money if the borrower ends up in foreclosure. PMI fees can vary from .03% to 1.5% of the loan amount. PMI isn’t like homeowner insurance which protects the homeowner – PMI is specifically there for the lender but is paid for by the buyer.

 

Additionally, because conventional loans are offered by private lenders and not backed by government programs, they are typically harder to qualify for because the lender is assuming all the risk.

 

FHA Loans

FHA (Federal Housing Administration) is an agency within the US Department of Housing and Urban Development (HUD). FHA loans are great for first-time home buyers because they typically don’t require a 20% down payment and have more lenient restrictions on credit score and debt-to-income ratio.

 

With a credit score of 580 or higher, the down payment requirements can be as little as 3.5%. For credit scores lower than 580, you may still qualify but the down payment would increase to at least 10% of the purchase price.

 

Because FHA loans are backed by the federal government, lenders have less risk and therefore are more likely to offer more competitive rates. Additionally, cash for down payments can be from a gift for most FHA loans which is prohibited for conventional loans.

 

VA Loans

If you are an active-duty, veteran or surviving spouse of the U.S. Military, a VA loan is a good option. VA loans are issued by private lenders and guaranteed by the U.S. Department of Veterans Affairs (VA).

 

VA loans require $0 down payment, do not require PMI, offer competitive interest rates, and have less stringent qualifications so they are easier to obtain than conventional.

 

Fannie Mae & Freddie Mac

Funny names, but great programs. Fannie Mae and Freddie Mac are entities inside the Federal Housing Finance Agency that were created specifically to help stabilize the mortgage industry. Fannie Mae and Freddie Mac work with local lenders to offer mortgage options that benefit low and moderate-income families.

 

Because of the government backing, lenders offering Fannie Mae and Freddie Mac loans can assume less risk which translates to more competitive interest rates and down payments as low as 3% of the purchase price.

 

Special Mortgage Programs and Grants for Home Buyers

In addition to the mortgage loan types mentioned above, there are many special programs available for first-time home buyers and those in special segments. Here’s a few worth considering:

 

City of Frisco Down Payment Assistance Program

Now, here’s another reason to consider Frisco for your first home purchase! If you are an employee of the Frisco Independent School District or the City of Frisco, this is for you. The Frisco Down Payment Assistance Program provides forgivable loans up to $10,000 for down payment and closing cost assistance. The program is designed to help low to moderate-income families and first-time home buyers.

 

TSAHC Programs

The Texas State Affordable Housing Corporation offers two loan programs. The first is the Homes for Texas Heroes Program which offers loans for teachers, police officers, correctional officers, firefighters and EMS personnel, as well as veterans.  The second program is the Home Sweet Texas Home Loans for low and moderate-income families.

 

Both programs offer a 30-year fixed interest rate mortgage at competitive rates and a down payment assistance (DPA) of 3% to 5% of the loan amount. The DPA is a gift and does need to be paid back. You do not need to be a first-time buyer to qualify for either program, but first-time buyers also can apply for a Mortgage Credit Certificate (MCC) which offers special tax credits up to $2,000 a year to those who qualify.

 

203(k) Loan

If you want to consider a fixer-upper home, the Section 203(k) Rehabilitation Program might be a consideration. Backed by FHA, these loans offer special discounts and incentives for buyers interested in homes that need repairs. This loan lets you borrow the funds for the purchase price of the home, as well as funds needed for the improvements. Down payments for a 203(k) loan can start as low as 3% of the purchase price.

 

FHA Energy Efficient Mortgage (EEM)

EEM loans are designed to help borrowers create an energy-efficient home without a larger down payment. Since energy efficient homes are more beneficial to the environment, they are insured by FHA or VA programs which helps lenders offer competitive rates and lower down payments. Improvements include items such as more energy-efficient appliances and HVAC, new insulation, or double-paned windows.

 

Calculator Tools

With so many options for mortgage types and down payments, here’s a calculator tool to help you calculate how much you should borrow.

 

Armed with the right information and tools, getting started on finding your first dream home can be an exciting and life-changing event. The Judi Wright Team is dedicated to making sure your experience is exceptional from start to finish. Give us a call at 469-634-0932 and let us show you around.


About the Judi Wright Team

Judi Wright/The Judi Wright Team is a real estate group specializing in the suburbs of Frisco, Plano, and surrounding areas. Named the “Best Realtor in Dallas,” by D Magazine twelve times and a Five Star Realtor with Texas Monthly. Judi is also a Company-Wide Top performer with Ebby Halliday and the #2 Top Group for Ebby Halliday Frisco.

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