For those that are considering to purchase their first home, the process can prove to be intimidating and quite daunting. Purchasing a home will mean a substantial amount of commitment to be rendered and it is a very important financial decision that should always be given serious consideration before beginning the process
For those that have made the necessary decisions, buying a home for the first will usually will require a mortgage loan in order to purchase the home or property. First time buyer mortgages exist in order to make purchasing a home a possibility, for it is almost a matter of fact that a first time buyer will not have the financial capital to buy his/her first home without a mortgage loan.
What are First Time Buyer Mortgages?
First time buyer mortgages are loans that are offered to individuals that have never purchased a home or property in the past. In general, first time buyer mortgages exist in order to provide for the necessary assistance to qualified individuals to purchase their first home or property.
Typically, most first time buyer mortgages are part of certain programs that are offered by both the state and federal government. However, it is not uncommon for private financial institutions such as banks or mortgage companies to offer first time buyer mortgages as well, though they might vary from those offered through governmental programs.
First time buyer mortgages will differ from other types of mortgage loans based on the nature of the terms. The following are a few factors that may be included in first time buyer mortgages, though not all aspects may be covered:
1. No down payment, or small down payment amount
2. Interest costs are subsidized
4. Forgiveness loans
5. Limitation of fees imposed by lending institutions
6. Payment deferment
History of First Time Buyer Mortgages in the United States
It can be said that first time buyer mortgages arose from the creation of the Federal Housing Administration, which had to overall goal of giving incentive to lending institutions to offer mortgage loans to first time buyers by providing mortgage insurance to such companies.
Even though the FHA would transfer its authority to the Department of Housing and Urban Development in 1964, the FHA still remains as the largest provider of first time buyer mortgages in the country. However, it should be noted that apart from the existing FHA first time buyer mortgage programs, there are also those implemented by the states on a smaller scale.
Qualifications for First Time Buyer Mortgages
An obvious requirement to obtain these types of loans is that the applicant must be buying a home for the first time and has not owned a home or property previous. However, there are also more strict requirements required by first time buyer mortgages, though they may differ depending on the institution or program offering the loans.
Generally speaking, the main factor that qualifies individuals for first time buyer mortgages is the income level of the applicants. Certain considerations may be subject to exceptions, such as individuals that are recently divorced, even if they had owned a home with the ex-spouse. Another exception may be if the person has been in the market to buy a home but has not been able to do so in the past three years.
First time buyer mortgages will also impose restrictions on the home or property that can be purchased with this type of loan. Typically, a price restriction will be imposed, meaning that borrowers should not expect to be able to purchase expensive and grandiose homes.
First time buyer mortgages are reserved for those that exhibit specific needs. The first time buyer mortgages will also dictate which homes or property can be purchased based upon certain requirements of the home, such as that it must be in good condition and meet building and safety codes.