If you're shopping for your first home loan, you've come to the right place. Here's a quick primer to explain types of purchase loans and the programs you can use to access them. Some of the programs can be particularly helpful for first time homebuyers, especially if you haven't yet built a strong credit history or large savings account.
The right mortgage loan program can get you into a home faster and help you optimize your home investment. Here’s information on popular first time homebuyer options.
When you compare loan programs, consider:
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Purpose (purchase, purchase and rehab, or construction)
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Requirements (including down payment amounts, income and credit scores)
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Allowances (such as non-resident co-signers or gifts toward down payment)
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Sponsors (government agency or private)
Purchase Loans
With a purchase loan, you enter a contract to purchase an existing home and complete an application for a mortgage. As your lender, we will go through the process of verifying your income, assets and credit, while also confirming the value of the home through an appraisal.The money is transferred to the seller at closing.
Construction Loans
As the name suggests, a construction loan funds a home that has not yet been completed. After all permits and contracts are approved, we will advance money to the home builder on a set schedule, following each step of the construction process. After the home is completed, you will pay off a simple construction loan by refinancing it to a regular mortgage loan. Construction-to-permanent loans make this transition automatically.
Purchase & Rehab Loans
These loan programs provide funds for both the purchase of the property and costs for repairs, upgrades or expansion. The property’s value is appraised based on the planned improvements.
VA Home Loans 
VA loans are a special type of home mortgage reserved for active military members and veterans. These home loans are guaranteed by the U.S. Department of Veterans Affairs and offered by participating approved lenders. VA loans allow eligible veterans and active military personnel to realize their home buying dreams and help existing VA homeowners with money-saving refinance options.
Purpose:
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Purchase or Construction
Requirements:
- Available only to veterans or active-duty members of the U.S. Armed Forces
- High safety standards for purchased property (such as no peeling paint or missing handrails)
Benefits*:
- $0 down payment
- No monthly mortgage insurance
- Flexibility in qualification (credit scores, cash-on-hand)
- Higher maximum loan amounts
- Higher debt to income ratios
*Benefits vary based on service history and eligibility.
Allowances:
- Financing available for eligible closing costs
- Can be assumed by another approved veteran. In this scenario, the buyer takes over the existing loan from the seller, accepting the same terms and paying the difference between the loan balance and the purchase price. The difference can be financed with a second loan.
Sponsor:
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U.S. Department of Veterans Affairs (VA)
USDA Home Loans 
USDA loans are designed to encourage rural land development and growth in rural areas. They were long thought of as just for farmers, but the program has been expanded in recent years to give more people looking to purchase or refinance in a rural area access to the incredible benefits offered by these loans.
Purpose:
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Purchase, Purchase and Rehab, Construction
Requirements:
- Must fall in an area designated as “rural” by the USDA, as shown in this property eligibility map
- Maximum loan limits dependent on area
- Owner-occupancy required
- Cannot be income-producing
- Income up to 115% of the area median income
Benefits:
- $0 down payment
- Flexible credit eligibility
- Reduced mortgage insurance
Allowances:
- Financing available for eligible closing costs
- Gift money, grant money and seller contributions allowed
Sponsor:
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United States Department of Agriculture (USDA)
FHA Home Loans 
FHA loans are insured by the Federal Housing Administration. These loans are designed to help first-time homebuyers and experienced homeowners alike by providing them with a low down payment option. FHA mortgage insurance serves as protection for lenders in the event of a homeowner defaulting on their home loan.
Purpose:
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Purchase or Purchase and Rehab (FHA 203K Program)
Requirements:
- Mortgage insurance required for life of loan
- Maximum loan limits dependent on area
Benefits:
- Credit and qualification flexibility
- 3.5% down payment
- Higher maximum loan amounts than Federal Housing Finance Authority (FHFA) conforming limits in some areas
Allowances:
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Seller contributions and gift money allowed
Sponsor:
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Federal Housing Administration (FHA)
Conventional Home Loans 
Purpose:
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Purchase, Purchase and Rehab, Construction
Requirements:
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Maximum conforming loan limits set by the Federal Housing Finance Authority (FHFA)
Benefits:
- Down payments as low as 3%
- Fixed rate and adjustable rate mortgages available
- Available for 1-4 family property and primary occupancy, secondary occupancy or investment
- Mortgage insurance required only while loan is more than 80% of the home’s value
Allowances:
- Seller contributions and gift money allowed
Sponsor:
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Fannie Mae; Freddie Mac; private lenders including independent banks, credit unions or other mortgage lenders
Special Conventional Programs Include the following:
#1 Fannie Mae Homestyle Renovation Loan
Purpose:
- Purchase and Rehab
Requirements:
- Maximum conforming loan limits set by the Federal Housing Finance Authority (FHFA)
Benefits:
- Purchase and cost of renovation combined into one loan
- Renovation can be simple refresh (paint and flooring), major repairs or luxury upgrades
- Flexibility of a conventional loan
- Cancellable mortgage insurance
Allowances:
- Seller contributions and gift money allowed
Sponsor:
- Fannie Mae
#2 Fannie Mae HomeReady
Purpose:
- Purchase
Requirements:
- Maximum conforming loan limits set by the Federal Housing Finance Authority (FHFA)
- Homeowner education program
- Income 80% or lower than area’s median income
- Primary Residence
Benefits:
- 3% down payment
- Higher debt-to-income ratios
- Flexible credit eligibility
- Flexibility of a conventional loan
- Cancellable mortgage insurance
Allowances:
- Seller contributions, grants and gift money
- Non-occupant co-borrowers
- Rental property payments considered as income
Sponsor:
- Fannie Mae
#3 Freddie Mac Home Possible
Purpose:
- Purchase
Requirements:
- First time home buyer (at least one borrower)
- Income 80% or lower than area’s median income
Benefits:
- 3% down payment
- Flexibility of a conventional loan
- Cancellable mortgage insurance
Allowances:
- Non-occupant co-borrowers
- Mulitple available down payment sources, including family, employer-assistance, secondary financing and sweat equity
Sponsor:
- Freddie Mac
Multifamily 
Purpose:
- Purchase or Purchase and Rehab
Requirements:
- Owner occupancy
Benefits:
- 5% down payment for 2- to 4-unit properties
Allowances:
- Program dependent (conventional, HomeReady or HomeStyle Renovation)
Sponsor:
- Fannie Mae
JUMBO Home Loans 
Purpose:
- Purchase, Purchase and Rehab, Construction
Requirements:
- Must fall within allowable loan and down payment amounts
Benefits:
- Loan limits beyond those placed by the government-sponsored agencies
- Down payments as low as 5%, but typically higher with greater loan amounts
- Fixed rate and adjustable rate available
- Any type of residential property and occupancy
- Cancellable mortgage insurance
Allowances:
- Seller contributions and give money allowed
Sponsor:
- Private lenders including independent banks, credit unions or other mortgage lenders
State & Local Loan Programs
Contact us to learn of any state or locally sponsored loan programs for first time buyers.
Bottom Line
We are happy to review your options with you. Let's start a converstaion even if you're months away from your home purchase. It can pay to start early! 888-616-9885
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