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The Best Lenders for First-Time Buyers in 2021
The Best Lenders for First-Time Buyers in 2021
June 03, 2021 / Nadav Shemer
The Best Lenders for First-Time Buyers in 2021
June 03, 2021 / Nadav Shemer
Being a first-time home buyer is about more than just becoming a home owner for the first time. Qualified first-time buyers may be eligible for conventional low down payment loans such as the Fannie Mae HomeReady and Freddie Mac Home Possible loan programs, government-backed low down payment loans such as the FHA loan, and zero down payment loans such as the VA loan for veterans and service people.
Here’s our list of the top 3 mortgage lenders for first-time buyers in 2021, along with useful tips to make the most out of your first-time buying experience.
Top 3 Lenders for First-Time Home Buyers
#1
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Founded: 2002
Satets: 49
Min. down payment: 3%
Pros
  • Low down payment options
  • 100% online lender
  • Mortgages close quickly
Cons
  • Rates not advertised publicly
  • No weekend phone hours
AmeriSave Mortgage Corporation is a 100% online mortgage lender serving borrowers in every state except New York. It has broken the digital mortgage process down to the bare essentials, allowing it to close mortgages in as little as 25 days. AmeriSave’s expert loan consultants are on hand to assist borrowers throughout the entire mortgage process. If you’re short on funds, AmeriSave will waive some or all closing costs in exchange for a higher interest rate.
AmeriSave accepts down payments as low as 3% for first-time home buyers through the Fannie Mae HomeReady loan program. Qualification requirements include minimum 620 credit score and income limit of no more than 80% of area median income for the property’s location. Monthly private mortgage insurance (PMI) amounts to 0.5-1% of the loan amount each year. PMI can be cancelled by borrower request after 20% of the loan has been paid or, if you forget, it cancels automatically after 22% has been paid.
#2
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Founded: 2016
Satets: 46
Min. down payment: 3%
Pros
  • Fast pre-approval
  • No origination fees
  • Only 3-6 weeks to close
Cons
  • Not licensed in 4 states (HI, MA, NV, NH)
  • No physical branches
Better Mortgage, also known as Better, is a tech-powered independent mortgage lender backed by big investors like Citi, Goldman Sachs, and American Express. The Better.com application process is a truly digital experience. Thanks to its streamlined online platform, Better Mortgage is able to show you rates and get you pre-approved in minutes. Even at its slowest, it closes loans about 10 days quicker than the industry average.
Better offers low down payment mortgages through the HomeReady loan program, which we already described above in our AmeriSave review. It’s also worth noting that Better makes mortgages a lot simpler for everyone – first-time buyers and non-first-time buyers alike. For example, it charges no origination fees, shaving a significant amount off the closing costs you pay at the start of your mortgage.
#3
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Founded: 1996
Satets: 50
Min. down payment: 3%
Pros
  • 100% online application (in most cases)
  • Quick pre-approval and closing times
  • Flexible repayment terms (8-29 years)
Cons
  • No branches
  • Lack of support for self-employed borrowers
  • Your data may be shared across Quicken partners
Quicken Loans has enjoyed a meteoric rise in the mortgage business, officially becoming America’s largest mortgage lender in 2020. The most popular way of applying to Quicken Loans is through its online lending platform, Rocket Mortgage. If you’re not comfortable entering your financial data online, you can also request a phone call with a Quicken Loans agent. Loans usually take 30-50 days to close.
YOURgage is Quicken’s own spin on the Fannie Mae low down payment loan program. In addition to only requiring a minimum 3% down payment, YOURgage also offers the flexibility of being able to choose a repayment term of between 8 to 29 years. Debt income ratio must not exceed 50%. Closing costs are around 2-6% of the purchase price, similar to a regular mortgage. Mortgage insurance can be cancelled once you reach 20% equity.
Definition of a first-time home buyer
In order to help lenders identify and assist first-time buyers, the Department of Housing and Urban Development has created guidelines to what constitutes a first-time homebuyer. Under these guidelines, a first-time homebuyer is an individual who meets any of the following criteria:
  • An individual who has had no ownership in a principal residence during the 3-year period ending on the date of purchase of the property. This includes a spouse (if either meets the above test, they are considered first-time homebuyers).
  • A single parent who has only owned with a former spouse while married.
  • A single parent who previously co-owned a home while they were married.
  • An individual who is a displaced homemaker and has only owned with a spouse.
  • An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations.
  • An individual who has only owned a property that was not in compliance with state, local or model building codes and which cannot be brought into compliance for less than the cost of constructing a permanent structure.
Other benefits of being a first-time buyer
For many first-time homebuyers, the primary barrier to buying a home is not having the money for a down payment. Low down payment loans are one solution, because they allow first time buyers to get into a home with just a 3% down payment, instead of the usual 20%. In this section, we outline some of the other forms of assistance.
Down payment assistance. Depending where you live, down payment assistance may be available from state or local government agencies, private entities, or nonprofits. One form of assistance available to first-time borrowers across the country (except New York) is the Chenoa Fund. This program is administered by CBC Mortgage Agency, a federally chartered government agency. Provided you meet certain eligibility requirements, the Chenoa Fund may offer up to 3.5% down payment assistance.
HomePath homes. HomePath homes are foreclosed home offered for sale by Fannie Mae, one of the two government-sponsored enterprises that guarantee qualified mortgage loans via the secondary market. Benefits of a HomePath mortgage include low down payment, quick financing, and below average sale prices.
HUD home buying programs. In certain circumstances, first-time buyers may be eligible for assistance programs run by the Department of Housing and Urban Development. For example, the Good Neighbor Next Door program offers people in certain professions (law enforcement, teachers, firefighters, emergency medical personnel) discounts of up to 50% on homes in “revitalization areas”. To qualify, you must commit to living in the home for at least three years.
Bottom Line
Buying your first home can be an exciting but daunting experience. If you don’t quite have the funds for a 20% down payment, then the alternatives range from low down payment mortgages to various forms of assistance. As always, make sure to shop around between multiple lenders before making a final decision.
By Nadav Shemer
Nadav Shemer specializes in business, tech, and energy, with a background in financial journalism, hi-tech and startups. Nadav writes for bestonlinemortgageloan.com. He enjoys writing about the latest innovations in financial services and products.
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