Best mortgage lenders for first-time homebuyers in 2022

With so many mortgage lenders out there, it can be challenging to know where to start, especially if you’re a first-time home buyer. Bankrate looked closely at several key criteria to help narrow down the top mortgage lenders for first-timers, including what down payment products or down payment assistance they offer, what first-time buyer programs they have and other aspects that borrowers can navigate. can help. . Home buying process. Here’s our guide to the best mortgage lenders for first-time home buyers in 2022.

First time home buyer loan programs

There are many different types of loans to choose from when you are a first-time home buyer, including:

Conventional loans backed by Fannie Mae or Freddie Mac – loans that require only 3 percent down, but also a minimum credit score of 620 (sometimes higher, depending on the lender) and other eligibility criteria

FHA Loans – Government-insured loans (and the easiest first-time loans to qualify for) with down payments as low as 3.5 percent if your credit score is 580 or higher, or 500 and 579 if your credit score is 10 percent below, and mandatory mortgage insurance

VA Loan – A government-guaranteed loan for military members, veterans and spouses that does not require a down payment, but does require a funding fee.

USDA Loan – A government loan ideal for moderate-to-low-income borrowers buying a home in a USDA-eligible rural area, with no down payment required

Fannie Mae’s HomePath Ready Buyer Program – Offers 3 percent in closing cost assistance to first-time home buyers of Fannie Mae properties and requires completion of a buyer education course.

Good Neighbor Next Door – US Department of Housing and Urban Development (HUD) program that helps police officers, teachers, EMTs and firefighters buy homes in certain areas

FHA 203(k) – Allows you to borrow the funds you need to buy and fix up a home, all in one mortgage and with a low down payment requirement.

The type of loan that’s best for you depends on several factors, including how much you’ve saved for a down payment, your credit score, and whether you work in a particular field or served in the military.

First time home buyer grants and assistance

If you lack funds for a down payment or closing costs, help is available through your mortgage lender or a local, federal or state housing authority or other organization.

One form of assistance for those who qualify is the first-time home buyer grant. A grant is a one-time lump sum that helps cover your down payment or closing costs. Often, this grant does not need to be repaid if you live in the home for a certain period of time or meet other criteria.

You can ask your lender what grants may be available to you, and also find grants or other assistance programs in your area using Bankrate’s directory of first-time homebuyer programs by state.

In addition to grants, you may be a candidate for other financial resources as a first-time buyer, including:

A low-interest loan, which must be repaid over several years (unlike a grant).
A forgivable loan, which doesn’t have to be repaid after a certain amount of time, as long as you stay in the home and keep up to date on your mortgage payments.
Deferred-payment loans, which usually require payment in full, but do not charge interest
A savings match program, in which a bank or other institution matches the amount you deposit with the institution

How to choose a mortgage lender as a first time home buyer

You may find a variety of mortgage lenders in your search for a loan, including banks, credit unions, and independent and non-depository institutions. You may also come across mortgage brokers, who can help you uncover loan offers from different lenders that will be right for you.

As you search for a lender, consider your goals and what you might value in your experience getting a mortgage. What type of loan are you looking for? How long do you plan to stay in the area? Are you comfortable with 24/7 support? Do you need access to home buyer education? All these questions and more can help you narrow down your choices.

Once you have a short list, shop around and compare mortgage offers. Lenders include the APR, or annual percentage rate, and the interest rate on the offer, but you really want to consider the APR, which reflects the actual cost of the mortgage. Generally, the lower the APR, the cheaper the loan.

Another mortgage lender we considered

We evaluated more than two dozen mortgage lenders before choosing our favorites. Here are the other lenders we looked at and the reasons they didn’t make the cut:

Guaranteed Rate:

This lender has an easy-to-use interface and lets you close digitally, but it doesn’t have first-time home buyer assistance like many of our top picks.

Pentagon Federal Credit Union:

If you have a 650 credit score, Penfed offers $500 to $2,500 in lender credit for all members, depending on how much you borrow. However, credit unions do not have FHA or USDA mortgages.

USAA: USAA currently only offers VA mortgage lenders.

LoanDepot:

LoanDepot is a solid lender, but it doesn’t have any special features that make it stand out from the crowd.

Wells Fargo:

The lender has home buyer assistance for low-income buyers. However, Wells Fargo has had several public controversies over the past few years over claims of racist lending practices, creating fake bank accounts and charging customers for insurance products they didn’t sign up for.

Caliber Home Loans: Caliber has no first time home buyer assistance programs.

Fairway Independent Mortgage lenders Corporation: This is a strong lender overall, but it doesn’t have products geared toward first-time buyers like some of our top picks.

Trustee: This lender has several different low down payment options, including one without mortgage insurance. However, that J.D. Ranks below average in customer satisfaction according to Power.

Veterans United: Veterans United offers many types of mortgage lenders, not just VA mortgages. However, it does not have a program for first-time buyers.

CMG Financial: CMG has unique grant opportunities and mortgages. They can be good options, but these programs are not for everyone.

Freedom Mortgage: This is a good lender if you have a low credit score, but you can’t fill out an online application.

Flagstar Bank: This lender offers a variety of home loans, but none of its features make it stand out.

Movement Mortgage: Movement Mortgage will process your mortgage lenders within seven business days. However, it has no home buyer assistance programs.

Ally: Ally has a convenient online process, but only offers traditional mortgage lenders.

NBKC Bank: NBKC is an overall good mortgage lender, but you will need a good credit score.

PNC Bank: PNC’s offerings aren’t as robust as what you can get from our selected lenders.

Rocket Mortgage: Rocket Mortgage ranks high in customer satisfaction, but it has a few features that make it perfect for a first-time buyer.

Tips for comparing lenders for first-time home buyers

First-time homebuyers often face two main obstacles to getting a mortgage lenders: their credit score and their lack of cash to make a large down payment. If this sounds like you, you’ll want to shop around for a lender that has lower credit score minimum requirements and fewer down-payment options.

Before you apply, find out what your credit score is and get an estimate of your down payment based on how much you plan to spend on the home. These are two important factors that lenders will look at when deciding:

Do you qualify for a mortgage?
If you qualify, what will be your interest rate?

Most mortgage lenders look for a credit score around 620, so if yours is lower than that you’ll have to dig a little. Although some loans, such as VA loans, have no minimum credit score requirements, lenders will apply something called a credit overlay to create a credit score minimum that makes sense for their risk tolerance.

In addition to popular mortgage lenders products for first-time buyers like FHA loans, many lenders have specialty loans that cater to first-time buyers. When you’re shopping for lenders, start with your own financial institution. Ask them if they have any loans that meet your needs. They may also offer customer discounts.

If you don’t get approved for a loan right away, loan officers will often work with you to get on track to qualify. It could be as simple as raising your credit score, paying off some debt, or squirreling away a little more for a down payment.

Methodology

Forbes Advisor reviewed 12 mortgage lenders that do business both online and in-person throughout the United States. The lenders we reviewed represent some of the largest mortgage lenders by volume, which include banks, credit unions and online lenders.

Our scoring methodology included capturing more than 10 data points, which covered interest rates, lender fees, loan types, discounts, accessibility and borrower requirements.

The best lenders for first-time homebuyers excelled in areas that are historically important for this group including low- to average-credit score requirements, low down payment options and availability of grant programs.

The following is the weighting assigned to each category:

Loan costs: 30%
Speed: 20%
Credit requirements: 20%
Loan types offered: 20%
Access and availability: 10%

Specific characteristics taken into consideration within each category include APR, average interest rate, origination fees, minimum credit score requirements, discounts and customer service availability.

We also offered bonus points up to 5% of the score when a lender considers alternative credit data.