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Affinity Title

MORTGAGE KNOWLEDGE CENTER

PenFed Mortgage with Confidence

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

Mortgage Topics

  • VA Loans
  • Conventional Loans
  • First Time Homebuyer
  • Home Equity
  • Homebuying 101
  • Checklists
  • Adjustable Rate Mortgages
  • PenFed Top 10
  • Refinance
  • Jumbo Loans
  • FHA
  • Videos

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image

CONVENTIONAL LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

  1. Home
  2. Mortgage Knowledge Center
  3. How to Choose the Right Mortgage for Your First Home

MORTGAGE

How to Choose the Right Mortgage for Your First Home

What you'll learn:Learn about the different types of mortgages and how to choose the one that’s best for you

EXPECTED READ TIME: 8 minutes

June 19, 2023

How to choose the right mortgage for your first home

If this is your first time purchasing a home, deciding which financing option is right for you can be confusing. With different loan guidelines, down payment options, credit score qualifications, and fees, it can be hard to decipher which loan is best for your unique financial situation. Here, we made a list of some of the most affordable loan options for first-time homebuyers.

Best loan options for first-time homebuyers

There is a long-held belief amongst first-time homebuyers that you must put twenty percent down to purchase a home. In fact, according to the National Association of Realtors, 35% of consumers still believe they need a down payment of 16% to 20% to qualify for home financing, when in reality, the current average for a down payment is much lower and ranges between 6% to 7%.

While putting twenty percent down was the norm a few decades ago, many Americans today can’t afford to contribute that much toward a down payment. With home prices trending upward and the cost of living increasing, it is challenging to save a substantial sum. A twenty percent down payment helps avoid extra fees like mortgage insurance (MI) and private mortgage insurance (PMI) and decreases interest rates, but for some, it could take many years to save that much money.

There are many available mortgage options that require smaller down payments, and with some, you can put even as little as three percent down. With other types of loans, you might even be able to get a mortgage with no down payment at all. Plus, asking your loan originator to check with local or state housing programs can help determine if you qualify for any down payment assistance programs designed specifically for first-time homebuyers. These are the best loan options for first-time homebuyers. 

  • FHA Loan
    Insured by the Federal Housing Administration, an FHA Loan usually has a minimum down payment of 3.5%. Applicants with a credit score as low as 580 are eligible to apply, and even if your credit score falls between 500 and 579, you can still apply for the loan as long as you can make a 10% down payment. 
  • Conventional Loan
    A conventional mortgage is a loan not insured by a government agency. Some of these mortgages offer a 3% down payment, but they typically require a credit score of 620 or higher. If your credit is in good shape, but securing money for a down payment is difficult, this loan is a great option.
  • USDA Loan
    Available to homebuyers in eligible rural and suburban zip codes, this loan is offered by the United States Department of Agriculture, and is a zero-down payment mortgage. With low interest rates and no private mortgage insurance (PMI) premiums, this is an affordable option.
  • VA Loan
    Insured by the United States Department of Veterans Affairs, VA Loans help qualified service members, Veterans, and eligible surviving spouses become homeowners. These loans typically require no down payment, have competitive interest rates, limited closing costs, no private mortgage insurance premiums, and are a lifetime benefit, meaning those who qualify can use this guarantee over and over again.
  • Renovation Loan
    As a first-time homebuyer, you might not have the funds to afford your dream home or purchase in a desirable neighborhood. A renovation loan can give you the money to buy your first home, while hiring a contractor to make the desired improvements and repairs. You might even save some money in the process. 
  • Down Payment Assistance
    There are many down payment assistance programs for first-time, and low to moderate-income homebuyers that exist nationwide. This assistance exists in the form of grants and loans and can be used to cover down payment and closing costs.

If you’re looking to purchase your first home, there are many loan options and down payment assistance programs you may be eligible for. Don’t forget to speak to your loan originator to see which loan options are best for your financial situation. Now, it’s time to get excited about the upcoming responsibilities and fun that being a homeowner brings!

For more information about PenFed Mortgages:
 

PenFed Mortgage: 

800-970-7766

Get Started

SIMILAR ARTICLES

Top 10 Benefits of Owning vs. Renting | PenFed Credit Union

Considering buying a home instead of paying for rent? Read on to see what the advantages are including building equity & having your own space.

two people standing in front of their first house

Making the Move From Renting to Owning - Everything You Need to Consider | PenFed Credit Union

Ready to buy a home? Here is what to consider when transitioning from renting to owning a home.

Family walking dog through neighborhood

Buying vs. Renting in Today’s Market – Should You Buy or Wait? | PenFed Credit Union

Which is best for you - buying vs. renting? We'll help you go through the pros and cons of each so you can make the best decision to fit your goals and lifestyle.

Woman on phone with moving boxes

Mortgages 101: What First-Time Homebuyers Need to Know | PenFed Credit Union

Overview of mortgage terminology that first-time homebuyers will come across when buying their first home. It's important to understand the terminology used so buyers can better understand their mortgage.

military personnel being handed keys to new home
image

CONVENTIONAL LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

Mortgage Topics

  • VA Loans
  • Conventional Loans
  • First Time Homebuyer
  • Home Equity
  • Homebuying 101
  • Checklists
  • Adjustable Rate Mortgages
  • PenFed Top 10
  • Refinance
  • Jumbo Loans
  • FHA
  • Videos

Mortgage Products

  • Mortgage Center
  • Refinancing
  • Home Equity

PenFed HELOC

Rates as Low as % APR* with flexible use of funds

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Disclosures

1Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on discount point, which equals percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.

*Prime Rate is % as of . The APR for this Home Equity Line of Credit (HELOC) is based on prime plus a margin and can change monthly. Fixed Rate Advances will be amortized over the Fixed Rate Advance Term, with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin, and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes.

  • Annual Fee: Notwithstanding the foregoing, an annual fee of $99 will be assessed on each account anniversary.
  • Home equity lines of credit (HELOC) are variable rate loans and the interest rate is subject to increase after consummation of the loan on monthly basis. Closing costs range between $500 and $8,500 for credit lines of $500,000. Contact a representative for additional details.

Appraisals: PenFed will attempt to establish value via an independent method. If that method is unsuccessful, or the value is not sufficient for the amount requested, an appraisal will be required regardless of CLTV. An appraisal is always required in the following circumstances:

For all loans with a loan amount greater than $400,000.

If an appraisal is required, it must be ordered by PenFed. You will be contacted for authorization and payment prior to ordering. Appraisal fees average $550 to $850 (some run higher).

  • Closing Cost Credit: PenFed will pay most closing costs associated with a home equity line of credit (HELOC), which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. Member is responsible for any city, county, and/or state taxes if the subject property is located in FL, LA, MD, MN, NY, TN, or VA. If an appraisal is required, the member, who is responsible for the fee whether or not the loan closes, will pay the cost.

Interest may be tax deductible, consult a tax advisor for further information regarding the tax deductibility of interest and charges.

Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Draw Period. During your Draw Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.

Fixed Rate Advances will be amortized over the Fixed Rate Advance Term with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes and 4.75% for investment properties.

Property Insurance: Property insurance is required.

Multiple PenFed Loans: Multiple PenFed Equity loans and HELOCs are available as long as the member and collateral qualify (except Texas). For Equity loans and HELOCs the total indebtedness cannot exceed $500,000 for all PenFed Equity and HELOCs combined.

PenFed does not lend on:

  • Mobile homes
  • Co-ops or time-shares
  • Properties that are currently listed on the market for sale
  • Commercial property or property used for commercial purposes, even if a residence is part of the property
  • Undeveloped property (land only)
  • Properties with more than 4 units

Properties that are currently under major construction/renovations: Property must be fully livable, with no safety issues. (Examples: no missing rails from stairs/decks, no open walls with wires showing, missing kitchen appliances/counters, missing bath fixtures or unfinished pool).

  • Additional limitations may apply

Home Equity Line of Credit:

  • This Account has a Draw Period of 10 years, followed by a repayment period of 20 years.
  • If only minimum payments are made during the draw period, the loan balance will not decrease.
  • In Texas, the maximum CLTV available is 80% on owner occupied properties. Additional restrictions apply in Texas, so please ask a representative for details.
  • In all other states, the maximum CLTV is 85% on owner occupied properties and second homes. Additional restrictions or requirements may apply based on application characteristics.
  • Property type of Condo has a maximum CLTV of 80%.
  • The maximum CLTV available is dependent on credit qualification.
  • Rates vary depending on owner occupancy and CLTV and other loan criteria.

Minimum Loan Amount Requirements in all States:

  • For an owner occupied property or second home the minimum loan amount is $25,000 and the maximum amount is $500,000 with a CLTV of 85% or less of the fair market value.

Other terms and conditions apply; call 844-918-4307 to speak with a representative for details. All rates and offers are subject to change without notice. To receive advertised product, you must become a member of PenFed.

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This credit union is federally insured by the National Credit Union Administration. Rates are current as of October 2023 unless otherwise noted and are subject to change.

APY = Annual Percentage Yield
APR = Annual Percentage Rate


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IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website that is not a part of Pentagon Federal Credit Union.


The content you are about to view is produced by a third party unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Realty, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Realty, LLC, see the Affiliate Business Arrangement Disclosure.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website.


The content you are about to view is produced by a third party website that is unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Title, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Title, LLC, see the Affiliate Business Arrangement Disclosure.


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