Mortgage and Portfolio Loan Guide

First Time Home Buyer Loan | Complete Guide

Cheers to adulting. When searching for the right first time home buyer loan it can be daunting and confusing to the point of saying “forget it, I’ll just live with Mom and Dad forever!”

The good news for you is that I have put together a full guide below on how to select the perfect first time home buyer loan. A comprehensive list of loan options that will leave you feeling like “okay world, I got this.”

What is a first time home buyer loan?

Basically, a first time home buyer loan is any mortgage option designed to cater to the needs of borrowers who have not bought a home in the past (recent 3 years) and have little-to-no funds available for down payment.

Typically, you need to have income and credit established, but there are options available even if you do not have traditional credit established.low down payment mortgage

Some options below do NOT require you to be a first time home buyer, but they have been listed because they are super popular for first time home buyers to take advantage of regardless.

Low Down Payment Mortgage | 1% Down

—1% down program ends May 31st, 2018.—

If you have a 720 credit score or above, this first time home buyer loan might be for you.

This is a conventional option, with typical mortgage guidelines. Except for one thing: you only have to put 1% down!

The way it is set up is on a 97% loan to value conventional loan, and you are actually gifted 2% from the lender. So it is a true 1% down loan.

In some areas of the US, there income limitations on this product. You can check your area for income limitations here.

This is pretty much a no brainer if you have good credit and stable income. Contact me to learn more on this option.

Main things to keep in mind with this 1% down mortgage

  • Down payment is 1%
  • Income limitations in some areas
  • Cannot have any ownership interest in any other residential dwellings at the time of closing
  • You do NOT have to be a first time home buyer to be eligible for this option

USDA Rural Development Loan | 0% Down

Getting a USDA Rural Development Loan is a great option for low-to-moderate income families who are looking to buy a house with zero down payment.

This is a very popular product for first time home buyers. Every area in the US is different in terms of income restrictions and whether or not the area you’re looking to buy in is eligible for a “rural development” loan.USDA rural development loan

Oddly enough, there are MANY areas in the country that are eligible for USDA rural development loans that I personally wouldn’t necessarily consider to be rural areas.

Some very well established suburban areas are eligible for USDA loans. Take a look for yourself here. Once you click “accept”, you’re able to plug in any address, and it will let you know if that address is eligible for a USDA rural development loan. Very easy to use.

The big thing to keep in mind with USDA loans (besides geographic location) is the income restriction on these types of loan.

All household income is taken into consideration (even if the spouse who will live in the home is not on the mortgage). Check out this useful tool to see if you fit within income eligibility restrictions.

Even some condominiums are eligible for a USDA Rural Development Loan. Unlike FHA loans, where the condo needs to be on the approved FHA condo list, USDA loans simply require a standard conventional condo review to be done (which is nice because it it much more simple than FHA in this case).

Main things to keep in mind with USDA Rural Development Loan

  • 0% down payment
  • Low credit okay (580 FICO minimum)
  • Income restrictions
  • Geographic restrictions

FHA Loan | 3.5% Down

In my humble opinion, FHA loans are probably the most commonly used loan product when it comes to first time home buyer loan options. This is because of low credit requirements and fairly low down payment.

Although you do not have to be a first time home buyer to be eligible for this type of loan, it is an attractive route to go due to the fairly flexible underwriting guidelines.

The nice thing about FHA loans is that they are available in every state and city. There are no geographic restrictions. But do be mindful of the FHA county loan limits. Check out the FHA county loan limits in your state here.

With an FHA loan there is NOT a maximum household income restriction, which is what makes it a nice alternative to USDA loans.

Even though you don’t have to be a first time home buyer to be eligible for an FHA loan, it is extremely rare to be able to have more than one FHA loan at one time. There are very few scenarios where it is allowed. So rare that those scenarios aren’t listed here due to guidelines changing frequently. Contact me for questions on that.

Main things to keep in mind with getting an FHA Loan

  • 3.5% down payment (if 580 or above credit)
  • No maximum income restrictions
  • Low credit standards (as low as 530 FICO – if below 580 higher down payment may be required)
  • Available in all cities in all states
  • Each county has set maximum loan amounts.

FHA Construction Loan | 3.5% Down

When you’re dealing with a market where inventory is low, a construction loan might be the perfect fit. You get to select the lot and build the exact house you want. With an FHA Construction Loan you can buy the land and finance the construction loan all in one loan.

This type of loan is what is known as a construction to permanent one-time close loan. This is where you finance the land and the construction all-in-one. If you already own the land, that is okay too, and you can use the equity you have in the land as collateral (down payment).

If you talk to 100 loan officers, probably 99 of them will tell you FHA construction loans do not exist. This is low down payment home loansbecause most lenders don’t deal with FHA Construction loans because they are a bit more labor intensive than regular FHA loans.

FHA Construction Loans definitely exist and can be done. The key is to understanding how FHA construction loans work.

The income, credit, and asset guidelines are the same as regular FHA loans. The difference is having to work with getting your builder approved for this type of financing.

The best part about this type of construction loan is you get approved up front, building get’s done, and you move in. You DO NOT have to go through the approval process again after the home is completed.

Main things to keep in mind with FHA Construction Loan

  • 3.5% down payment
  • 620 FICO minimum
  • Can use existing equity as down payment if you already own the lot
  • Can buy land and finance construction all-in-one loan
[more on FHA construction loans here]

VA Loan | 0% Down

If you’re currently serving in our armed forces, or are a veteran of the US military – thank you for your service to our country. Semper Fidelis

A VA loan is a fantastic 0% down option for a first time home buyer loan, and a great option even if you have bought a home in the down mortgage

There are MANY different levels of eligibility depending on when you served, how long you served, and if you were active or reserve. Here is a chart from the VA to show eligibility.

One huge way the VA has given back to their wounded veterans is with regard to the funding fee affiliated with getting a VA loan.

If you’re receiving any percentage of disability from the VA you’re exempt from paying the VA funding fee – which can save you thousands.

The other benefit is that you do not pay monthly mortgage insurance premiums on VA loans.

There are no maximum income restrictions on VA loans, and VA loans are available in every corner of the US.

Main things to keep in mind with a VA loan

  • Must be an eligible veteran of the US armed forces, currently serving, or an unmarried surviving spouse.
  • Can go as low as 530 credit score in some cases.
  • 0% down payment
  • $0 mortgage insurance (big monthly savings)

Which first time home buyer loan is best for you?

There are clearly plenty of options to choose from, and everyone’s situation is different.

Find out which product meets your needs best today. Apply Here

First-Time Home Buyers Guide: Buying With Student Loans And Debt

I invite you to reach out to me.

Get your questions answered.



real estate investment loans



E004: Building Your House w/ FHA Construction Loan

E004: Building Your House w/ FHA Construction Loan

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What you need to know about building a house with an FHA Construction to Permanent One Time Close Loan.

Full article here:

Keep in mind, there are limits to loan amounts for FHA in every county, check your county here:

Building Your Home with an FHA Construction Loan

Getting an FHA construction to permanent loan is a wonderful opportunity to build the home you want, with a lower down payment than most lenders require on a construction loan.

In this article we’ll cover all the main points you need to understand if you’re looking to build a home from the ground up with an FHA construction to perm loan.

How to Get an FHA Construction to Perm Loan

When existing home inventory is low, building your own home is often a very attractive idea. You get to select the location, the builder, the floor plan, the paint colors… everything! The problem is that most lenders want 10-25% down payment when considering terms on a construction loan.

With an FHA construction to permanent loan the down payment can be as low as 3.5%.

This low down payment option is extremely encouraging news to many borrowers looking to build a home.

Here are the top things you need to understand when considering an FHA Construction to Permanent Loan


First and foremost, you need to make sure you’re eligible for an FHA loan.non-warrantable condo

Get apply today to make sure you meet all income, credit, and asset guidelines. If you don’t meet normal FHA guidelines, there is no sense in seeking an FHA construction loan.

The good news is that FHA guidelines are less strict than other traditional mortgages, so many times it’s just a matter of getting a few ducks in a row to get the qualification in line.

Selecting Your Builder

Once you have gotten confirmation that you’re eligible for FHA financing, you’ll need to find the right builder for you.

You’ll want to see what work they have done in the past, how long they have been in business, what types of projects they are willing to take on, and how long they typically take to build a home with the same characteristics you’re seeking.

A very important thing to keep in mind is the chemistry you have with the builder. You’ll be communicating with this person heavily over the next 6-12 months. It’s super important that you feel comfortable with your builder from an experience and service standpoint.

Builder Approval

After you have selected the right builder to meet your needs, it’s time to get that builder approved with your lender.

With an FHA construction to permanent loan, not only do you have to be approved as a borrower, but the builder also must go through a detailed approval process. They’ll need to provide things like: references, two year’s tax returns, a year to date profit and loss statement, applicable licenses, and more.

Depending on the builder, this approval process could take 2-12 weeks. It really just depends on the availability of the builder to provide the documents needed.

Site Selection

If you have been pre-approved, and your builder has been approved, things are certainly moving in the right to permanent loan lenders

At this point it’s time to select the right lot to build your home on. With an FHA construction to perm loan you can finance the land and the construction all in one loan. If you already own the land, even better. You are able to use the equity that you have toward down payment.

Example: you own a 2 acre parcel that you are looking to build on. Let’s say the lot is worth $20,000 and you own the land free and clear. The 20K in existing equity can be used as collateral toward your down payment.

Very important – FHA does NOT allow any value to be given to any existing buildings on the lot.

The appraised value of the lot will be based on raw land. If you have a barn on the land worth 20K, and the land is worth 20K, that does not mean FHA will consider it to be a full existing value of 40K. Only the land can be considered with regard to existing equity.

Project Approval

Once the site is selected, it’s time to get set figures from the builder regarding what the costs are going to be from start to finish.

When you have come to terms with the builder on the numbers, the lender will review the construction agreement and structure your loan accordingly. FHA does NOT allow the borrower to be involved with the construction in any way.

The builder must be responsible for all construction and improvements in the construction agreement. The borrower cannot act as the builder.

Loan Structure

FHA loans have limitations on how high the loan can be in each county in each state.

FHA construction to permanent loans are no different with regard to county loan limits. Here is a site that tends to keep county construction to permanent loan lenderslimits up to date.

During the construction period, the builder is responsible for covering monthly interest only payments on the construction loan. This creates a win/win scenario for builder and borrower. It’s a win for the builder because they know they payment will be made (they don’t have to rely on the borrower making payments to keep things moving along).

It’s a win for the borrower because if the builder is responsible for payments, they are more likely to treat the build with urgency because they don’t want to be stuck with carrying the construction loan payments for more months than necessary.

Once the home is completed, the loan is converted to the FHA loan for the borrower to begin making payments on.

Construction Contingency

There are typically changes to the materials or slight modifications to the specifics in the contract causing overages on top of what was originally estimated.

Construction contingencies are available for project cost overruns and borrower change orders. Basically, whatever the estimated cost and labor is, the lender will increase that estimated amount by 5% to account for unforeseen extras. If the funds are not used, the difference will be applied toward the principal balance (the loan will have a lower balance at the time it is converted from construction to permanent).

One Time Closeconstruction to permanent loan lenders

There are two different types of construction loans: one time close, and two time close.

A two time close means you get approved, get appraisal, and close on the construction loan. Once construction is complete, you get approved all over again, get another appraisal, and then close on your permanent loan.

With the FHA product, it’s a one time construction loan. This means you do NOT have to go through the process twice. You get approved up front, get appraisal up front, and close. Once the construction is completed, final inspection is done, a certificate of occupancy is provided, and the construction loan is converted into a permanent loan.

You do not have to get approved all over again on a one time construction loan.

Basic steps toward your FHA Construction Loan approval:

  • Get pre-approved
  • Get builder approvedfha construction loan
  • Select your lot
  • Complete construction/purchase agreement with builder/seller
  • Get project approved through lender
  • Complete loan approval (complete conditions with lender, appraisal, title, etc.)
  • Close on construction loan (provide down payment/costs/escrows)
  • Begin construction
  • Construction complete
  • Move into your newly built home, begin making payments on your FHA loan

Building a home is not a good fit for everyone.

There is more to manage and more decisions to be made when building a home than when buying an existing home. But if you are considering building a home, an FHA construction to perm one time close loan may be a great option for you to consider.

Not what you’re looking for? FHA 203k rehab loans here.


I invite you to reach out to me.

Get your questions answered.



real estate investment loans