Buying a home can feel overwhelming. There’s a lot of paperwork, a lot of programs, and a lot to think about. When I bought my first home, I received guidance from a great real estate agent and a mortgage broker. Not everyone is so fortunate.
“First-time homebuyers tend to be younger, may have less available for a down payment, may need a gift from a parent for that down payment, and they likely have student loans,” said Andrew S. Weinberg, a principal at Silver Fin Capital Group, LLC, a company that offers mortgages. “First-time buyers may also have credit card debt and possibly poor credit.”
Reviewing the best mortgage lenders for first-time buyers can be a good place to start your mortgage search — even if you face challenging financial issues. We’ve put together a list of lenders that can help you get your first home loan. We looked at ease of use, ability to address issues like a thin credit file or poor credit, and access to special programs.
Check out our list to see if one of these lenders will work for your situation.
1. Quicken Loans
Quicken Loans offers a number of programs that make it one of the best mortgage lenders for first-time buyers. It’s one of the largest lenders offering loans under the FHA home-buyer program, which accepts down payments as low as 3.5 percent. Additionally, Quicken Loans offers access to VA loans. Besides affordable down payments, these programs can also help borrowers with less-than-perfect credit.
If the FHA down payment isn’t low enough for you, Quicken also offers a 1 percent down option. If you can only manage a small down payment, but you have a credit score of at least 680 and meet other requirements, the 1-percent-down mortgage could work for you.
Quicken Loans is also helpful for online-savvy borrowers who want a streamlined process (read our Quicken Loans review). The Rocket Mortgage platform walks you through everything you need for a mortgage — and you can do it from the comfort of your home.
2. Wells Fargo
Another major player in the FHA loan space is Wells Fargo, which like Quicken, also offers access to VA loans. Plus, if you are willing to live in a rural area, you can take advantage of USDA’s Guaranteed Rural Housing Program. This is a great program for low- to moderate-income borrowers with little or no down payment.
Wells Fargo also works with NeighborWorks America and local nonprofits to provide down-payment assistance to qualifying homebuyers. If you are struggling, you can receive homeownership education, and possibly get some help through the NeighborhoodLIFT program.
3. Navy Federal
If you have an armed forces connection, you can join Navy Federal credit union and access their mortgage program. This is one of the best mortgage lenders for first-time buyers because the underwriting process is flexible enough to allow for those with thin credit files to receive consideration.
According to Randy Hopper, the vice president of mortgage lending at Navy Federal, loan officers can evaluate applications using alternative credit scoring. When you submit an online mortgage application, a loan officer calls you back.
If you are eligible to join Navy Federal, you can also access FHA and VA loans, as well as other programs designed to help military servicemembers and veterans with first-time homeownership.
You probably recognize SoFi from its work refinancing student loans, but this company also offers mortgage loans. SoFi is known for allowing 10 percent down on mortgages, without borrower-paid monthly private mortgage insurance — which is usually required when you have a down payment of less than 20 percent.
For first-time buyers with student loans, SoFi can offer other advantages. SoFi features flexible debt-to-income limits, which can be helpful if you want to buy a home while you still carry student loans. Plus, SoFi offers a rate discount if you are already a member.
CitiMortgage is available in all 50 states and, like many of the others on this list, offers FHA and VA loans.
A major bonus with CitiMortgage is its HomeRun mortgage programs, which uses flexible credit guidelines ideal for those with thin credit files or poor credit scores. You can put down as little as 3 percent and, even though the down payment is low, you don’t have to worry about monthly PMI payments.
6. New American Funding
New American Funding uses a computer-based underwriting system for your loan at first, but there is also additional manual underwriting. This gives you a chance to use alternative credit reporting — you can also share your personal story in an effort to get a loan, even if you have a thin credit file. This way, the lender can evaluate you as an individual, rather than rejecting you out of hand just because you don’t have a “traditional” credit history.
Additionally, New American Funding offers a wide variety of loans, including FHA and VA loans, as well as options like interest-only and adjustable-rate mortgages. If you need some tweaking as a first-time homebuyer, this can be an option.
Fairway is a lender that accepts alternative credit scoring from eCredable. If you have a thin credit file and are struggling with the traditional credit scoring model, Fairway might be able to help. Fairway is compatible with Charity House program, which offers a “discount and giving back” program. With Charity House, you can work with a participating real estate agent to get a discount on your home and give back to your community through various partnerships.
Evaluating the best mortgage lenders for first-time buyers
As you evaluate the best mortgage lenders for first-time buyers, don’t forget to look locally. Small credit unions and community banks might be able to help you with programs you weren’t aware of. Additionally, you get the benefit of sitting down and speaking with someone face-to-face.
Remember, too, that sometimes lenders willing to be flexible aren’t the best deal. You might be excited about the prospect of buying a home even though you don’t have a credit history, or a down payment. But the reality is that you will pay in other ways. In some cases, these lenders charge higher interest rates because you are an unknown risk.
Just because you can get a mortgage by going outside the traditional route doesn’t mean you should. If you are denied a mortgage using traditional underwriting standards, it might be a sign that changes to your finances might be in order.
Make sure you are truly ready to buy a home — and can afford the mortgage — before you take the plunge into homeownership.