Common Loans for First Time Home Buyers

FHA loans were very uncommon just a few years ago.  They have now exceeded 30% of the loans originated and are an even higher percentage of the loans for first time home buyers.  What this has done is create a more direct link between the FHA rate and the amount of home that a first time homebuyer can afford.

See common loans for first time home buyers comparisons on the site.

The biggest change that we’re seeing is that the FHA rate is now sitting close to 5% and has been for some time.  Compare that to historical rates over 6%, we have a level of home affordability that we have not seen in years.  Rates are starting to slide higher, but we currently have almost 15% of extra purchasing power for the average first time buyer.

HUD announced that they will be making changes to the up-front part of the mortgage insurance on FHA loans effective April 2010.  This will add .5% to the mortgage premium.  This is to help make the pool of loans more secure, but will mean higher expenses for first time homebuyers.

Nearly all first time home buyer loans are fixed rates these days and many states have down payment assistance programs that help get you into a home at today’s lower home values, low rates, and avoid the future increases to FHA closing costs.

Some state by state examples:
Nebraska: The state of Nebraska provides one first time home buyer grant program: Single Family Homebuyer Assistance. You can receive up to 4.25% of the mortgage amount as a loan that turns into a grant. For more information, please go to Nebraska First Time Home Buyer Grant.

See all the state down payment assistance or first time home buyer programs.