When I was fist inquiring about financing a home, I was under the impression that there is a specific “first time home buyer program” that will help me obtain a larger loan with government assistance. I had a girlfriend purchase her home in our early 20s and she is the one who told me all about this program. So you can only imagine the disappointment I felt when I learned that this specific program is not a real thing. Sorry if you were taken back with that comment, but seriously there is no such thing as a “first time home buyer program”. When I first started working for Meyer and learning about all the different programs, I asked him about this specific one. His eyes almost rolled to the back of his head when I did. He mentioned that he hears about this all of the time, but it is actually a bait and switch tactic that some lenders do within this industry. People believe they are getting the best loan built specifically for them, since they are first time home buyers. He said that it is usually presented like that but the loan is really an FHA or a conventional loan.
FHA loans are insured by the Federal Housing Administration, a federal agency within the Department of Housing and Urban Development. FHA loans are government-assisted alternatives to conventional financing and are great options for those who want to put less money down or who have lower credit scored. They are popular for home purchases and for refinancing. While these mortgages do require expenses in the form of monthly mortgage insurance, they still enable many homeowners who don’t qualify for conventional financing to purchase or refinance home.
Conventional loans are loans that are NOT backed by the government. These types of loans are originated and serviced by private mortgage lenders, like banks, credit unions, and other financial institutions. In general, conventional loans don’t have the same requirements as government- insured loans like a low credit score and no down payment or mortgage insurance.
If we want to dive deeper, there are hundreds of program options, that frankly I find overwhelming just trying to understand them all! That is why it is important to work with a lender that you can trust and have confidence in. As long as they have your best interest at heart, they will search the abundance of programs and find what works best for you. I guess what I am trying to say is when you are ready to start shopping, do not ask for a the “first time home buyer loan”. It is a myth and gives the lender an opportunity to do a bait and switch on you…