We value our editorial independence, basing our comparison results, content and reviews on objective analysis without bias. But we may receive compensation when you click links on our site. Learn more about how we make money from our partners.
First-time homebuyer guide
Don't let being green to the market hold you back from borrowing for your dream home.
Buying your first property is among the biggest decisions you’ll make in a lifetime. And if you get your home at a good price with strong mortgage rates and terms, it can also become an investment that grows your money over time.
Compare mortgage options for first-time home buyers
Why we like:
- Competitive loan offers
- 1,500+ lenders with reviews
- Simple application
Why we like: LendingTree
- Compare rates from a number of lenders.
- Get alerts when a better deal is available.
- Simple application.
What are you looking for?
How do I compare mortgages as a first-time homebuyer?
Start with positioning yourself for the strongest rates and terms you’re eligible for. Consider your current finances, including how much you’ll be able to put down.
Once you have a sense of a realistic budget for your home, consider the ways that you can save more on your mortgage:
- Look for a mortgage with lenient requirements. If you you’ve saved up less than 20% of your potential home’s value for a down payment, narrow your search to lenders that advertise low-deposit mortgages.
- Ask a parent to guarantee your loan. If your parents own property, your lender may allow them to secure your mortgage with their equity, allowing you to put down less than 20% up front. Make sure they understand the risks that include losing their own home if yours ends up in foreclosure.
- Take advantage of first-time benefits. You may be eligible for tax breaks and even lower-deposit mortgages as a first-time homebuyer, depending on where you live and what you’re buying.
What should first-time homebuyers look for in a loan?
If your lender doesn’t offer specific loans for first-time homebuyers, you may still be able to suss out an ideal mortgage by looking for:
- A low interest rate. No one wants to be stuck with a high interest rate, especially first-time buyers. A lower rate means lower monthly payments, making your mortgage more affordable. Some lenders offer special introductory variable rates, which start low for the first year or two but will revert to a higher rate later.
- Down payment requirements of 10% or less. Saving a down payment is often one of the hardest challenges for first-time homebuyers, especially if you need to save the traditional 20% of a property’s value to qualify for a loan. Loans targeting new buyers often have a max insured loan-to-value ratio of 90 or 95%, meaning you can get the loan with just 5 to 10% down. But you’ll need to pay private mortgage insurance if you’re borrowing above 80%.
- First-time-friendly loans. FHA loans allow for down payments that can be as low as 3.5% of your home’s value, while government-sponsored Fannie Mae and Freddie Mac loans can require 3%. If you’re a veteran, still other options require no down payment to secure a mortgage.
How much can I borrow?
To get an idea as to how much you can borrow, enter your household’s income, the number of your dependents and any existing debts into our calculator.
The calculator estimates your expenses using a standard cost-of-living index, giving you a home cost you’re likely able to afford.
Bottom line
Buying your first home is an exciting step, but working out the best way to position yourself for a strong mortgage can be stressful. Research your financing options and compare lenders to find the best rates and terms you’re eligible for.
Frequently asked questions
Image: Shutterstock
Read more on this topic
-
Alterra Home Loans review Unique lender that offers ITIC loan options and accepts non-traditional credit and income sources.
-
Why was my home loan application rejected? Discover why your lender may reject your home loan application and find out how you can improve your chance of being approved for financing.
-
Chase Bank vs. Bank of America mortgages We take a look at how these two big-name institutions compare for mortgage lending services.
-
BBVA vs. Chase Bank mortgages Both of these lenders are big name banks, but find out which has a troubled legal history.
-
Ally Bank vs. Chase Bank mortgages Both of these lenders offer more than just mortgage services, but one is better if you're looking for multiple home loan options.
-
How to get preapproved for a VA loan Accelerate your journey to homeownership by getting preapproved for your VA loan.
-
Churchill Mortgage review A Dave Ramsey-endorsed lender focused on “debt-free homeownership” through conventional and nontraditional mortgages.
-
Reverse mortgage vs. HELOC Both let you leverage the equity in your home, but that’s where the similarities end.
-
Fifth Third Bank mortgage review Its mortgage selection is impressive but availability is limited to residents of its branch network.
-
AmeriSave mortgage review It offers a variety of loan options, but the steep application fee is nonrefundable if you don’t close with the company.
Ask an Expert