Best Mortgage Lenders for First-time Buyers for September 2024

Buying your first home is exciting. But it’s also the first time you’ve done this and a home is the most expensive purchase that most people ever make. That’s why it’s so important to find a mortgage lender that won’t 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 you’re investigating lenders, be sure to look into something you may not already know about: special programs available to first-time homebuyers. You’ll see more about these offerings in the “Special benefits for first-time buyers” section later in this story.

Our recommendations

Best for a wide range of offerings

PNC Bank

Best for a wide range of offerings

PNC Bank

Min. credit score

620

Min. deposit

3%

Term

10-30 years

BBB Rating

A+

Why we like it:

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 Bank’s 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 won’t be able to do so with this lender.

Lower credit scores

Rocket Mortgage

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Lower credit scores

Rocket Mortgage

Min. credit score

620

Min. deposit

3%

Term

8-30 years

BBB Rating

A+

Why we like it:

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 lender’s 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 lender’s 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 borrower’s credit to determine an interest rate. This could temporarily reduce their credit score and hinder their eligibility when shopping around for the best lender.

Best for down payment assistance

Bank of America Mortgage

Best for down payment assistance

Bank of America Mortgage

Min. credit score

640

Min. deposit

3%

Term

15-30 years

BBB Rating

A-

Why we like it:

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 doesn’t include student loan debt when calculating the debt-to-income ratio for doctor loans, making it easier to qualify.

With Bank of America’s Mortgage Affordable Loan Solution mortgage, borrowers can pay 3% down for loans up to $766,550—5% 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, won’t be able to take advantage of these loan types.

Low-income borrowers

Chase Mortgage

Low-income borrowers

Chase Mortgage

Min. credit score

620

Min. deposit

3%

Term

10-30 years

BBB Rating

A+

Why we like it:

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 lender’s minimum credit score of 620 could make it difficult for some first-time buyers to qualify.

No lender fees

Ally Bank

No lender fees

Ally Bank

Min. credit score

620

Min. deposit

3%

Term

15-30 years

BBB Rating

A

Why we like it:

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.

No PMI

CitiMortgage

No PMI

CitiMortgage

Min. credit score

580

Min. deposit

3%

Term

15-30 years

BBB Rating

F

Why we like it:

CitiMortgage’s HomeRun Mortgage offers some big benefits for first-time buyers looking to save money. First and foremost, borrowers won’t 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 doesn’t speak well of the lender’s customer service. Therefore, borrowers should closely compare CitiMortgage with other lenders before choosing the one to go with.

Best online

Better

Best online

Better

Min. credit score

620

Min. deposit

3%

Term

15-30 years

BBB Rating

B

Why we like it:

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 can’t speak to a representative in person. However, the company does have a BBB rating of B+, so online customer service should be decent.

Reduced closing costs

Valley Bank Community Advantage/Plus Programs

Reduced closing costs

Valley Bank Community Advantage/Plus Programs

Min. credit score

620

Min. deposit

3% Advantage
5% Plus

Term

30 years

BBB Rating

A+

Why we like it:

The Valley Bank Community Advantage and Community Plus First-time Homebuyer Programs both feature affordable interest rates, lower down payment requirements, and reduced closing costs to help make homeownership more accessible and affordable. A low fixed origination fee of $495 and reduced closing costs also help you save money. Both programs are for first-time homebuyers, low-to-moderate-income families, and those who may not have the financial resources to qualify for traditional mortgages. “These programs are offered to First Time Buyers in all of Valley Bank’s assessment areas in NJ, NY, MD, PA, FL, AL, IL, and CA.,” says Sofi Cordero, vice president and community mortgage officer at Valley Bank. Valley Bank has a top A+ rating from the Better Business Bureau.

Best mortgage lenders for first-time buyers compared

Methodology

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.

Tips for comparing mortgage lenders for first-time buyers

Start by understanding exactly what you’re doing when you get a mortgage. Then learn the points to compare when you’re choosing a lender.

Understand what a mortgage is

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:

• Interest rates (fixed and adjustable).
• Closing costs.
• Lender fees.
• Loan terms.
• Available loan types.
• Special programs for first-time buyers.
• Closing time frames.

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.

Be sure you’re getting a fair deal

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. It’s 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.

Special benefits for first-time buyers

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.

How to qualify for a first-time homebuyer loan

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:

• Income requirements: Income requirements for first-time homebuyers vary depending on the type of loan and the lender's specific criteria. In general, lenders prefer borrowers to have a stable income source verifiable through pay stubs, tax returns, and other documentation.
• Debt-to-income ratio requirements: First-time homebuyers must meet a maximum debt-to-income ratio of around 43% to qualify for a mortgage. A lower ratio can increase approval chances and result in better interest rates.
• Credit score requirements: Lenders may require a minimum credit score, which can vary depending on the type of loan program. Some programs require a minimum credit score of 620, while others accept lower scores.
• Employment history: To qualify for a mortgage as a first-time homebuyer, lenders typically prefer borrowers to have a stable employment history of at least two years. However, there are some exceptions for unique employment situations.
• Down payment requirements: The down payment requirement for first-time homebuyers varies by loan program and lender. FHA loans require as little as 3.5% down, while conventional loans require at least 5%.
• Home-buying education classes: Some lenders and loan programs require first-time homebuyers to attend home-buying education classes. These classes provide valuable information on the home-buying process, including budgeting, credit scores, and mortgage options.

How do first-time homebuyer loans work?

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.

What programs are available for first-time homebuyers?

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.

First-time homebuyer grants

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

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 Mac’s DPA One is a free online resource where you can quickly find, understand, and match available down payment assistance (DPA) programs.

Homeownership vouchers

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.

Good Neighbor Next Door program

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.

FHFA First-time homebuyer mortgage rate discount

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.

Alternatives to getting a mortgage to buy your first home

For first-time buyers who don’t qualify for a mortgage—or a mortgage with favorable terms—it’s 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.

IRA withdrawals

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 59½ 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 you’re a couple, each of you could take out funds, netting up to $20,000 for the purchase.

401(k) loans

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 59½ ) and not pay taxes on the withdrawal. Furthermore, 401(k) loans don’t 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 59½, 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.

Insurance-policy loans

If you have a whole or variable life insurance policy with a cash value, you can borrow against that amount to buy a home. It’s 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 don’t repay the loan.

Money from family and friends

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.

TIME Stamp

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.

Frequently Asked Questions (FAQs)

What credit score is needed for first-time homebuyers?

Credit score requirements vary by loan type, program, and lender, but you’ll have more options with a credit score of 620 or higher.

How much do I need to save for a down payment?

Down payments vary based on the loan requirements and the home’s 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.

What is the easiest home loan for a first-time homebuyer to get?

The easiest home loan depends on the borrower’s 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.

What do I need to get pre-approved for a mortgage?

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 lender’s 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.