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What Is A First-Time Home Buyer Loan?

Learn more about what a first-time home buyer loan is and what you need to get one.

The investment in a home is still the American Dream for many people. If you’re ready to move on from renting, a first-time home loan may be the right choice for you. If you’ve never purchased a home before, it can be confusing to know what to buy and the steps to take. These loans are specifically designed to make buying a home as easy as possible for you.

Many first-time home buyers will find some nice advantages available to them as they enter the local real estate market. The key to success is learning about your options to ensure you’re taking advantage of all of those opportunities available to you.

First-Time Home Buyer Advantages

There may be opportunities for you to secure at the state or federal level to help you buy your first home. These come in the form of tax breaks and loans with more affordable features built into them. Keep in mind you still have to have the financial means to make your payment comfortably each month. You’ll also need to ensure you’re comfortable taking on these loans.

You may qualify for a federally backed mortgage loan, such as an FHA loan. These loans may help you to qualify for a loan with a lower credit score. They also typically offer a lower down payment requirement (unlike conventional loans, which often have a 20% loan down payment requirement).

Who Is Considered A First-Time Home Buyer?

Though this may seem like an obvious answer, it’s a bit more complex. The U.S. Department of Housing and Urban Development considers a person a first-time home buyer if they have not owned a home as a principal residence for at least the previous three years. You may qualify if:

  • You’ve owned a home, but your spouse has not, and you plan to buy together.
  • You are a displaced homemaker who has only owned with their former spouse.
  • You’re a single parent who owned a home while married.

Other qualifications may apply, as well. If you’re unsure if you qualify, be sure to ask your lender. They can clarify what you qualify for as a buyer.

What Type of First-Time Home Buyer Loans Are Available?

There are a variety of first-time home buyer loans available through various organizations. You may not have access to all of these loan options, but your lender can provide more insight to you on which you may qualify for right now.

  • FHA Loans: These loans are beneficial to those who have a lower credit score. You’ll still need to put down some money (usually around 3%), and you’ll need to meet other qualifications.
  • USDA Loans: These loans are fully guaranteed, which means they often offer lower interest rates and easier qualification terms. USDA loans may be ideal for those who are lower-income borrowers, especially in rural areas.
  • Fannie Mae and Freddie Mac Loans: If you have good credit, but you want to reduce the amount of money you need to put down, you may qualify for this type of conventional loan. It may only require a 3% down payment.
  • VA Loans: These loans are specifically for those who have served in the U.S. Armed Services. There is no down payment requirement, and interest rates (and other terms) tend to be very flexible.
  • Good Neighbor Next Door Program: This is not a loan directly but a program that may help provide you with easier qualifications. This is available to law enforcement officers, emergency medical professionals, teachers, and firefighters.

Other loan options may be available to you as well. Your lender can help you determine if you are qualified for any of these programs.

First-Time Home Buyer Qualifications

Once you identify the first-time home buyer programs you qualify for, you will need to meet the qualifications to obtain them. Some of the requirements may include:

  • Evidence of Income: Your lender needs to know you have enough income to comfortably make your monthly payment. They also typically need to know your income is reliable.
  • Credit Scores: Most lenders use credit scores to determine how much of a risk a borrower may be. If you have a low credit score, though, that doesn’t mean you outright don’t qualify for a loan.
  • Debt-to-Income Ratio: Lenders want to know you can make those payments consistently. To know that, they look at how much debt you have compared to your income.
  • Down Payment: Most home loans require a down payment. This helps lenders to know you’re serious about making payments on your loan.

Comparing First-Time Home Loan Options

It’s also important to choose the most affordable home loan for you. That means taking a look at opportunities from various programs and determining which is best for your needs and goals. There are many things to take into consideration, including:

  • Interest Rate: An affordable interest rate saves you money month-to-month and over the life of your loan.
  • Monthly Payment: Work with your lender to determine what your monthly payment will be. Is it an amount you feel comfortable making?
  • Mortgage Insurance: Depending on the type of loan you obtain, you may be required to maintain insurance on the loan.
  • Fixed or Adjustable Rates: Fixed rates remain the same throughout the loan term. Adjustable rates can change, and while they are often more affordable at the start of the loan, they can get higher over time.
  • Term: This is the length of the loan. Most loans are 30 years, but if you can afford a shorter term, it may save you money.

Finding The Right Loan To Buy Your First Home

Making the right decision matters. Luckily, you don’t have to do that on your own. Let the professionals help you navigate your options. At Listerhill Credit Union, we offer a wide range of home loans, including those that are ideal for first-time home buyers.

Learn More

For a limited time, get no PMI* in addition to low rates and local service with as little as 3% down for your home loan. Learn more here.

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  • The Great Giveback Official Rules

    1. Eligibility: No purchase or obligation necessary to participate and win. All participants must be 19 years of age or older at time of contest participation. Employees of Listerhill Credit Union are not eligible to register for the contest.

    2. How To Enter the Contest: All Listerhill members who have consumer loans in good standing, (subject to limitations below) are automatically entered. Anyone who takes out a new loan with Listerhill Credit Union, or refinances a loan from another lender with Listerhill Credit Union (subject to limitations below) will automatically be entered to win. Limit of one entry per loan.

    NO PURCHASE NECESSARY: To enter the contest without a loan, send a self-addressed, stamped envelope to: Listerhill Credit Union, P.O. Box 566, Sheffield, AL 35660, Attn: Great Giveback Contest Entry. Limit one entry per person. Written entries must be received no later than July 3, 2021.

    Listerhill Credit Union will not be responsible for incomplete, lost, late, misdirected or illegible entries or for failure to receive entries. All entries become property of Listerhill Credit Union and none will be returned. Any questions regarding the number of entries submitted shall be determined by Listerhill Credit Union in its sole discretion, and Listerhill Credit Union reserves the right to disqualify any entries by persons determined to be tampering with, violating, or abusing any aspect of the contest.

    3. Contest Entry Requirements: In the event the Credit Union, in its sole discretion, determines that any Entry contains content that does not comply with these Official Rules or does not otherwise comply with regulatory guidelines, Credit Union reserves the right to disqualify the entry.

    4. Determining the Winner: A Credit Union employee will select at random four (4) $500 winners (one per day July 12-15) and one Grand Prize Winner from all entries received on July 16, 2021. You do not have to be present to win.

    5. Prizes: $500 Cash Prize: the Credit Union will award four (4) members with $500 cash each. Grand Prize: The Credit Union will pay up to $25,000 toward your loan with Listerhill Credit Union, or combination of loans. No loan payments will be made to loans with any other lender. No cash equivalent provided, and the total prize amount may be less depending on the outstanding amount of loan balance(s) with Listerhill Credit Union. In no event will the prize awarded exceed the total amount of the winner’s outstanding balance of qualifying loans with Listerhill Credit Union. Federal, state and local taxes are the sole responsibility of the winner. IRS regulations require the Credit Union file a 1099 on behalf of the winner.

    A Credit Union employee will call the prize winners and the prize winners will be called up to five times during regular business hours at number provided on entry form and will leave no messages. Failure to reach winner during these calls may result in disqualification of winner, forfeiture of his or her interest in all prizes, and selection of a substitute winner drawn from the drum. Winner will be required to schedule a time, at least 48 hours in advance, to visit Listerhill Credit Union, located at 4790 2nd Street, Muscle Shoals AL, 35661 in person, during regular business hours within seven (7) days of being notified to claim prizes by providing proof of eligibility for prize won and completing and signing an affidavit of eligibility and a liability and publicity release. Failure of any Winner to timely contact the Credit Union, visit the above Credit Union office in person and sign and return any required affidavit and release, or to claim a prize or comply with any term or condition of these Official Rules, will result in drawing Winner's disqualification and the forfeiture of his or her interest in the prize. Winners may waive their right to receive prizes. Prizes are non-assignable and nontransferable. No substitutions allowed by winner.

    6. To be eligible to win, all loans must be in good standing (not more than 30 days past due at the time of drawing. Eligible loans are limited to auto loans (no indirect dealer loans), personal loans (no loans secured by real property, such as mortgages, 2nd mortgages, and Home Equity Lines of Credit) and recreation loans made to consumer borrowers (not business or commercial loans).

    6. Participation. By participating, entrants agree to be bound by these Official Rules and the decisions of the Contest. Except where prohibited, acceptance of any prize constitutes winner's consent to the publication of his or her name, biographical information and likeness in any media for any commercial or promotional purpose, without limitation the Internet, or further compensation. Prizes not won and claimed by eligible winners in accordance with these Official Rules will not be awarded and will remain the property of the Credit Union.

  • How do I redeem my Merchandise Rewards?

    The easiest way to redeem your Merchandise Rewards is to log into Listerhill’s Online Banking and click the “Get Info” link to the right of your credit card information. This will take you to our credit card servicing site within the same window. Select “Rewards” on the upper right side within the screen (below FICO Score) and on the next screen, click on the CURewards logo. This will automatically sign you in to be able to redeem your Merchandise Rewards points!