Personal Insights

First-time homebuyer loan programs

Buying your first home is intimidating, but first-time homebuyers can take advantage of many programs that make the process easier.

If you’re a first-time homebuyer, it’s easy to feel overwhelmed. Buying your first home can mean rushing around to attend busy open houses, placing offers in a tight housing market and making sense of a lot of new (and extremely important) paperwork. The process of buying a home for the first time can be a learning experience.

And then there’s the biggest concern of all for first-time homeowners: finding the right loan. Fortunately, there is help available for first-time homebuyers.

Before you apply

Before applying for a first-time homebuyer loan, you’ll want to have a sense of how much house you can afford. Generally, for most conventional mortgages, monthly housing expenses should not exceed 28%–33% of your income. This includes a mortgage payment, utilities, maintenance costs, property taxes and insurance. You can use a first-time homebuyer mortgage affordability calculator to get a sense of how this looks for your finances.

Once you know how much house you can afford, it’s helpful to get preapproved for a loan with a lender, such as Regions Bank. Preapproval will help you to understand how much of a mortgage payment you’ll be able to afford on your budget. Arming yourself with a preapproval letter will give you more flexibility—and when you find the home of your dreams, you’ll be ready to make an offer.

Loans for first-time buyers

While you’re looking for your dream property, you should look into special loans for first-time homebuyers, such as Regions’ Affordable Programs, which allow little to no down payment for eligible borrowers. Federal Housing Administration (FHA) loans are also available for homebuyers who meet specific credit and income criteria. Because FHA loans are insured by the federal government, they allow private lenders to loan to people who may be considered a higher risk. These loans are especially helpful for first-time buyers because they allow for lower down payments—sometimes as low as 3.5%.

Another program is Fannie Mae’s HomeReady program, which offers qualifying homebuyers with up to 3% of the home’s purchase price if homebuyers complete a homebuyer education course.

There are additional programs available to homebuyers, including first-time homebuyers, who are members of select groups. U.S. Department of Veterans Affairs loans, or VA loans, for example, are available for service members and their spouses, and this program offers no down payments and favorable interest rates.

Other incentives

Many grants and Down Payment Assistance programs (DPAs) are often available to help with buying your first home and are offered by various resources such as lenders, state and local programs for first-time homebuyers. Your lender can assist you with understanding eligibility requirements and how grants and DPAs may assist you.

You may even be able to use some retirement savings to boost your down payment. Every qualified first-time homebuyer can withdraw up to $10,000 from their IRA without incurring the typical 10% early-withdrawal penalty. If this is something you are considering, weigh how much it may set you back on your long-term goal of retirement.

Research always helps

Finding a loan for your first home requires doing research, but help is out there. If you're looking for home loans as a first-time buyer, Regions Bank can help you finance your dream home.

Three things to do

1. Boost your homeownership knowledge by exploring our podcast series.
2. Read more about different types of home loans to help you decide which might be right for your situation.
3. For a deep dive, read this step-by-step guide to buying a home created by the Consumer Financial Protection Bureau.