Best Mortgage Lenders for First-time Buyers for September 2024
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Buying your first home is exciting. But itโs also the first time youโve done this and a home is the most expensive purchase that most people ever make. Thatโs why itโs so important to find a mortgage lender that wonโt turn your dream come true into a nightmare. The best mortgage lenders have competitive rates and enough options to help you find the right mortgage for your first home purchase. Looking into mortgage options will also help you crystalize how much you can afford to borrow and guide you to the homes on the market that best match your budget.
While youโre investigating lenders, be sure to look into something you may not already know about: special programs available to first-time homebuyers. Youโll see more about these offerings in the โSpecial benefits for first-time buyersโ section later in this story.
620
3%
10-30 years
Sporting a top Better Business Bureau (BBB) rating of A+, PNC Bank offers conventional loans, FHA loans, VA loans, USDA loans, and jumbo loans, so first-time buyers can get the right loan for their circumstances. Plus, PNC Bank offers loans in all 50 states, making them widely available for borrowers.
For borrowers with less cash on hand, PNC Bankโs Community Loan is available with a minimum 3% down payment and no PMI (private mortgage insurance) requirement. Borrowers who are interns, residents, fellows, or doctors, can obtain a Medical Professional Loan through PNC Bank, with a maximum borrowing amount of $1 million and no PMI requirement.
On the downside, PNC Bank does not offer home renovation loans, so first-time buyers looking to purchase and renovate their first home wonโt be able to do so with this lender.
620
3%
8-30 years
Borrowers with Rocket Mortgage can be pre-qualified for conventional, FHA, VA, and jumbo loans in minutes, particularly if they have a minimum credit score of 620. However, borrowers who meet the lenderโs other eligibility requirements may qualify for a loan with a minimum credit score of 580. This is great for those with less-than-stellar credit. Rocket Mortgage also has a BBB A+ rating, which speaks to the lenderโs customer service.
However, Rocket Mortgage does not offer USDA loans, construction loans, or mortgages for mobile homes, which could shut borrowers out of home loans that could better suit their financial circumstances. In addition, Rocket Mortgage will run a hard inquiry on the borrowerโs credit to determine an interest rate. This could temporarily reduce their credit score and hinder their eligibility when shopping around for the best lender.
640
3%
15-30 years
Rated A- by the BBB, Bank of America Mortgage offers a variety of home loans for first-time buyers, including conventional, FHA, VA, jumbo, and doctor loans (available to doctors, residents, fellows, and dentists). Bank of America doesnโt include student loan debt when calculating the debt-to-income ratio for doctor loans, making it easier to qualify.
With Bank of Americaโs Mortgage Affordable Loan Solution mortgage, borrowers can pay 3% down for loans up to $766,550โ5% for loans up to $1,149,825 in high-cost areas designated by Fannie Mae and Freddie Mac. This is much less than the typical 20% down payment required for many home loans. In addition, while borrowers will have to carry PMI, they will receive it at a lower cost than with other home loans.
Bank of America Mortgage does not offer USDA or construction loans, so borrowers looking for homes in designated rural areas or wanting to build a new home, wonโt be able to take advantage of these loan types.
Offering home loans to borrowers nationwide, Chase Mortgage offers several loan types for first-time buyers. These include conforming, jumbo, FHA, and VA loans. However, the lender also offers the Chase DreaMaker mortgage, which includes a low down payment, flexible credit guidelines, and income limits. Coupled with this mortgage, borrowers could receive a $2,500 or $5,000 or $7,500 Chase Homebuyer Grant and/or $500 Homebuyer Education Benefit to help reduce closing costs and/or their down payment. This could be a boost for low-income borrowers. Chase Mortgage has a BBB rating of A+, so customers can expect the lender to deliver a good experience.
Chase Bank does not offer USDA or construction loans, which could limit the type of property borrowers can purchase. In addition, the lenderโs minimum credit score of 620 could make it difficult for some first-time buyers to qualify.
620
3%
15-30 years
Carrying a BBB rating of A, Ally Bank offers conventional and jumbo loans in all 50 states with pre-approval in just minutes. For first-time buyers, Ally Bank helps borrowers maximize their savings by offering home loans without any lender fees such as application, origination, underwriting, and processing fees. Borrowers can instead apply that money to their down payment or other closing costs. In addition, with its HomeReady mortgage, Ally Bank offers a home loan with a 3% down payment, flexible requirements, and flexibility in your down payment source.
Unfortunately, Ally Bank does not offer FHA, VA, or USDA loans, which could be better options for some borrowers. In addition, Ally Bank is only available online, which could be a drawback for borrowers who prefer to deal with an in-person lender.
580
3%
15-30 years
CitiMortgageโs HomeRun Mortgage offers some big benefits for first-time buyers looking to save money. First and foremost, borrowers wonโt have to pay PMI, which will lower their monthly mortgage payment. Also, with this mortgage, borrowers can pay a minimum down payment of 3%, which means they could purchase a home with less money. In addition, through its Lender Paid Assistance program, qualified borrowers could receive up to $7,500 to help pay their closing costs. CitiMortgage also offers conventional loans, FHA loans, VA loans, and jumbo loans, all of which are eligible for the Lender Paid Assistance Program.
Unfortunately, CitiMortgage has a BBB rating of F, which doesnโt speak well of the lenderโs customer service. Therefore, borrowers should closely compare CitiMortgage with other lenders before choosing the one to go with.
620
3%
15-30 years
Better Mortgage could be the right choice for borrowers who prefer to do business online. From start to finish, Better Mortgage home loans are fulfilled online. The lender offers conforming, jumbo, FHA, and VA loans without any commission fees. Borrowers can receive a loan estimate in seconds, per the website, and if they like the rate they see, they can lock it in instantly.
Better Mortgage does not offer USDA or construction loans, which could limit property selections for borrowers. And, because everything is done online, you canโt speak to a representative in person. However, the company does have a BBB rating of B+, so online customer service should be decent.
620
3% Advantage
5% Plus
30 years
Title | Min. credit score | Min. deposit | Term |
---|---|---|---|
PNC Bank | 620 | 3% | 10-30 years |
Rocket Mortgage | 620 | 3% | 8-30 years |
Bank of America Mortgage | 640 | 3% | 15-30 years |
Chase Mortgage | 620 | 3% | 10-30 years |
Ally Bank | 620 | 3% | 15-30 years |
CitiMortgage | 580 | 3% | 15-30 years |
Better Mortgage | 620 | 3% | 15-30 years |
Valley Bank Community Advantage/ Plus Programs | 620 | 3% Advantage | 30 years |
To choose the best mortgage lenders for first-time buyers, we reviewed more than a dozen lenders, focusing on down payment requirements, loan terms, BBB ratings, and credit requirements. We also looked at special loans and programs for first-time buyers from these lenders.
Start by understanding exactly what youโre doing when you get a mortgage. Then learn the points to compare when youโre choosing a lender.
A mortgage is a loan that is primarily used to buy or maintain a home or other type of real estate property, such as vacant land.
Homebuyers searching for the best mortgage lender should carefully research at least three because each will have its own programs and eligibility requirements for borrowers. Specifically, compare:
Evaluating and comparing these factors can help determine which lender offers the best home loans for your first home purchase. A spreadsheet is a good way to do it.
As a first-time homebuyer, be especially careful that you are getting the best rate you qualify for. Lenders are not obligated to offer these to you. A company may try to push you into accepting a subprime mortgage with less-than-optimal terms. Itโs up to you to do enough research to evaluate the offers you get and keep looking until you find the fairest and best options for your financial situation.
When shopping for the best mortgage lenders as a first-time buyer, be sure to factor in any special programs that could help you pay for your first home.
To qualify for a first-time homebuyer loan, borrowers must meet the eligibility requirements set forth by the lender and/or the first-time homebuyer program. These include:
First-time homebuyer loans are designed to help qualified borrowers purchase homes with lower down payments, closing cost assistance, capped fees, and other specific conditions to make the home more affordable. To qualify as a first-time homebuyer, borrowers must meet specific requirements, such as minimum income or credit score limits, and complete home-buying education classes.
There are many programs to help first-time homebuyers purchase their first home. Because not every lender offers every program, borrowers should shop around to find one that offers the programs that best fit their needs.
Grants are funds that do not have to be repaid. First-time homebuyer grants are available through government and lender programs. While they do not have to be repaid, grants typically have specific eligibility requirements and conditions. For instance, the National Homebuyer Fund offers a grant you can use toward down payment or closing costs.
Down payment assistance (DPA) programs provide funds to help borrowers with their down payment. These may be funds or grants, so, in some cases, they may have to be repaid. The U.S. Department of Housing and Urban Development (HUD) and many states offer these programs. Many lenders also have their own DPA programs. Freddie Macโs DPA One is a free online resource where you can quickly find, understand, and match available down payment assistance (DPA) programs.
Through the federal Housing Choice Voucher homeownership program, low-income first-time buyers can receive assistance to help buy their first home and pay their monthly housing expenses.
Through the Good Neighbor Next Door program, teachers, law enforcement officers, firefighters, and emergency medical technicians can buy homes for 50% off the list price and finance the purchases with down payments as low as $100. Available homes are limited as well as are the areas where you can buy.
The FHFA First Time Homebuyer Rate Discount is a government-sponsored home affordability program launched in 2022. The program reduces rate add-ons for eligible first-time buyers, saving up to 1.75% on their loan's interest rate. There is no application for the FHFA First-Time Home Buyer Mortgage Rate Discount. If you are eligible, you will receive your discount automatically.
For first-time buyers who donโt qualify for a mortgageโor a mortgage with favorable termsโitโs worth looking at other options for helping to finance your home. Many of these will not provide enough cash to pay for a home. The median home price in the U.S. as of Jan. 25, 2024 was $417,700. But they can help with a down payment or may result in your needing a smaller, more affordable mortgage.
If you have funds available in your traditional IRA account, you can withdraw up to $10,000 to purchase a first home before the age of 59ยฝ without penalty. You will pay taxes on the withdrawal, however. IRA plans do not offer loans.
You can withdraw contributions to your Roth IRA account at any time for any reason with no penalty and no taxes. To withdraw earnings up to $10,000, you must meet the five-year rule and qualify for the first-time homebuyer exception. If youโre a couple, each of you could take out funds, netting up to $20,000 for the purchase.
The best way to use 401(k) funds to purchase a home is to borrow from your account. This way, you will avoid the 10% penalty (for those younger than 59ยฝ ) and not pay taxes on the withdrawal. Furthermore, 401(k) loans donโt count toward your debt-to-income ratio (DTI) and are not counted by credit bureaus. Depending on your employer plan, you can withdraw up to $50,000. The loan must be paid back with interest.
Whether you can withdraw from a regular 401(k) plan depends on your employer and plan. There is no first-time homebuyer exception for withdrawals from a regular 401(k), so the withdrawal must qualify as another type of hardship to avoid the 10% penalty. Contributions to your Roth 401(k) can be withdrawn anytime without penalty or taxes. If you withdraw interest or appreciation before age 59ยฝ, there may be a 10% penalty unless you qualify for an exception. Again, couples can double the possible funds if they each borrow from their plan.
If you have a whole or variable life insurance policy with a cash value, you can borrow against that amount to buy a home. Itโs important to review the policy terms to determine your options for borrowing money because it could reduce how much your heirs receive in the event of your death. Also, you likely would have to pay interest on the loan amount, which would need to be paid even if you donโt repay the loan.
Whether a gift or a loan, buying a home using funds from family or friends comes with some understandable caveats. If you borrow money from your family for a down payment, for example, your mortgage lender will consider that loan as part of your DTI, which may impact the terms of your mortgage or even whether you can get a mortgage. Money given as a gift is subject to IRS limits that change yearly to avoid a gift tax obligation on the donor.
Buying a first home is an exciting event for anyone, and finding the right mortgage lender is essential to making the process smooth and successful. We recommend that borrowers research several lenders and compare loan terms and eligibility requirements to find one that best suits their circumstances.
Credit score requirements vary by loan type, program, and lender, but youโll have more options with a credit score of 620 or higher.
Down payments vary based on the loan requirements and the homeโs value. For instance, if the home is $300,000 and the down payment requirement is 3%, the down payment is $9,000. If the down payment requirement is 10%, the down payment is $30,000.
The easiest home loan depends on the borrowerโs financial circumstances. Having a great credit score, sufficient savings for a down payment, a low DTI ratio, and sufficient income could go a long way in helping a first-time buyer get approved for a home loan on good terms.
Before getting pre-approved for a mortgage, you should have your financial picture in order. This includes knowing your credit score to determine if it meets the lenderโs requirements. You should also know your DTI ratio, gather your income records (W2s, 1099s, or tax returns), and collect other financial records, such as bank and investment account statements. You must submit this information and any other requested documents to the lender for review and preapproval.
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