Buying your first home is a huge step, and it’s totally normal to feel a bit unsure about where to start. One of the trickiest choices? Figuring out which home loan works best for you. The mortgage you select shapes your monthly costs, how much you’ll need upfront, and even what kind of house fits your budget. Don’t worry, though! With the right guidance, you’ll feel confident making the right call.
FHA Loans
If you’re just starting out and don’t have 20 percent to put down or a stellar credit score, a Federal Housing Administration (FHA) loan can be a game-changer. The lower credit requirements and modest down payment make it a practical choice for many buyers.
Pros. Low down payment requirement (as little as 3.5 percent). Flexible credit score requirements. Some lenders will accept scores as low as 580. Competitive interest rates.
Cons. Requires upfront and annual mortgage insurance premiums (MIP), which can add to your costs. Loan limits apply, so it may not work for higher-priced markets.
Conventional 97 Loan
If you have a decent credit score and stable income, the Conventional 97 loan allows you to put down just 3 percent while avoiding the lifetime mortgage insurance that comes with FHA loans.
Pros. Down payment as low as 3 percent. No upfront mortgage insurance (unlike FHA loans). You can cancel private mortgage insurance (PMI) once you reach 20 percent equity.
Cons. Higher credit score requirement (usually 620+). Stricter income and debt-to-income ratio limits compared to FHA loans.
Fannie Mae HomeReady and Freddie Mac Home Possible
These programs are perfect for buyers with moderate incomes who want affordability without sacrificing flexibility. The ability to use alternative income sources for qualification can be a major perk.
Pros. Low down payment requirements (as little as 3 percent). Reduced private mortgage insurance costs. Allows for non-traditional income sources, like a roommate or boarder, to qualify.
Cons. Income limits may apply depending on your area. Higher credit score requirement (typically 620 or higher).
USDA Loan
If you’re open to living outside the hustle and bustle of the city, the USDA loan can help you get into a home with zero money down.
Pros. No down payment required. Low fixed interest rates. Reduced mortgage insurance costs compared to FHA loans.
Cons. Limited to properties in eligible rural areas. Income limits apply based on household size and location.
Good Neighbor Next Door Program
This program, offered by the Department of Housing and Urban Development (HUD), is aimed at specific professions like teachers, police officers, firefighters, and EMTs.
Pros. Offers a whopping 50 percent discount on eligible home prices. Low down payment requirements. Can combine with FHA financing for even more savings.
Cons. Limited to certain HUD-approved homes. Requires you to live in the home for at least three years.
Down Payment Assistance Programs
For many first-time buyers, coming up with the down payment is the hardest part. That’s where Down Payment Assistance (DPA) programs come in. These programs can bridge the gap between your savings and the amount you need to close the deal, making homeownership possible even if you’re on a tight budget. In Texas you may qualify for these programs:
My First Texas Home. Offers both down payment and closing cost assistance for eligible buyers.
My Choice Texas Home. Provides low-interest loans and down payment grants.
TDHCA MCC (Mortgage Credit Certificate). Offers a tax credit to reduce your annual federal tax liability, which can free up more cash for monthly mortgage payments.
Builder Incentives in Master-Planned Communities
If you’re considering buying in a master-planned community like Sunterra, you’re in for a treat. Builders often offer fantastic incentives to make your home purchase more affordable including contributions toward closing costs, free or discounted upgrades and special financing deals through builder-preferred lenders.
Purchase Your First Home in Sunterra
Ready to take the plunge into homeownership? Check out Sunterra. Our builders work with lending companies that can help you find the perfect loan for your budget. Visit us today.
