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First-Time Home Buyer Loan in Utah

 

row of suburban homesUniversity Federal Credit Union offers many perks to first-time home buyers; let us help you get into your first home!

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What You Need to Know About a First-Time Home Buyer Loan 

Buying your first home is an exciting time in your life, but you might have a few questions as you begin your home search. Luckily, our knowledgeable mortgage consultants are here to help you with the process from start to finish. This starts with breaking down a first-time home buyer loan to understand if you qualify. 

The first-time home buyer program is available to first-time potential buyers, even those with a lower credit rating, and fewer funds available for a down payment. The exact qualifications can vary from lender to lender, and there are unique rules that can apply. At University Federal Credit Union, our first-time home buyers must use the loan for a primary residence.

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First-Time Home Buyer Program Benefits

First-time homebuyer programs can provide lower interest rates, smaller down payments, customized financing options (including 100% financing), and may remove the requirement for private mortgage insurance. Our mortgage consultants are here to help you get into your first home while making the process as easy as possible. 

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First-Time Home Buyer Program Eligibility

For the purposes of mortgage loans, first-time home buyers are defined as anyone who:

  • has not owned a home in the last three years
  • has owned a home, but only with a former spouse, and is now a single parent
  • has been displaced as a homemaker, but only owned said home with a former spouse
  • has only lived in non-permanent homes (mobile homes, etc.), or in permanent homes that did not comply with applicable building codes

The following are credit score requirements for first-time home buyer loans:

  • Conventional loans will require a 620 credit score and a debt-to-income ratio below 50% for a 3% down payment.
  • FHA loans require a 580 credit score for a 3.5% down payment. A 500 credit score will require a 10% down payment.
  • VA and USDA loans do not have a minimum credit score. However, lenders may look for a credit score of 620 or better to qualify for these loans.

Other eligibility requirements include:

  • Loan must be used to buy a primary residence in Utah.
  • FHA loans require private mortgage insurance (PMI).

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Mortgage Options for First Time Home Buyers

Conventional Mortgage

A conventional mortgage is a mortgage that is not insured by a government agency. However, conventional mortgages typically do adhere to rules set forth by the government in the wake of the 2008 housing crisis.

A conventional mortgage is granted through a private firm. Usually, down payments on conventional mortgages are around 5% - 20% of the sale price. Committing more to a down payment lowers the risk of a default on the mortgage loan, which protects both the lender and the lendee, and often lowers the interest rate on the loan. For conventional mortgages with down payments of less than 20%, the lendee is required to purchase private mortgage insurance.

Mortgage insurance comes in two forms. Sometimes, it’s a one-time upfront payment on top of the down payment, and sometimes it’s a smaller additional payment on top of each on-going mortgage payment. It can also be a combination of both.

Because conventional mortgages are insured by private companies which, for the benefit of the economy, must protect their own interests, they typically require higher financial standards from their borrowers. Higher credit scores, incomes, and down payments are typically factored into not only the mortgage rate, but whether the borrower gets the mortgage at all.

If you’re looking for a conventional mortgage, University Federal Credit Union offers competitive rates and a streamlined mortgage application process. We can help you get a great loan at a low rate, and we will never sell your loan to another institution. 

A conventional mortgage, however, is not the only option for first-time home buyers in Utah. The government offers special insurance on loans that are less stringent in terms of financial requirements. These mortgages can be a great option for anyone in a financial tight spot.

FHA Loans

An FHA loan is a mortgage that has been insured by the Federal Housing Administration. The point of an FHA loan is to give lower income consumers the ability to purchase a house.

In 2008, the housing system collapsed as a result of reckless borrowing and lending. Banks would issue loans at promotional rates, with tiny down payments, to people with low income. After the promotional rates ended, and as rates across the board increased, these borrowers all defaulted on their loans in, essentially, one fell swoop.

The result was mass homelessness, unemployment, and trillions of dollars lost in the stock market.

It could have been a lot worse, too. Thankfully, however, in order to cushion the blow from housing crises like that one, the government has been insuring subprime loans since 1934.

The financial requirements for FHA borrowers are looser than for conventional mortgages. For example, one’s credit score can be as low as 500. For conventional mortgages, it’s 620. Similarly, the down payment for an FHA mortgage can be as low as 3.5%.

In order to insure the loan, the borrower is charged an upfront fee of 1.75% of the sale price. Then, on the on-going loan payments, an additional monthly premium must be paid. If the down payment on the FHA loan was more than 10%, these premiums can be cancelled after 11 years.

University Federal Credit Union specializes in all kinds of mortgages. We can even help you pre-qualify for an FHA loan!  

VA Loans

A VA loan is similar to a conventional and FHA mortgage in that they’re all issued by private lenders like University Federal Credit Union. However, there are also a number of key differences between VA loans and other types of mortgages.

VA loans are only available to U.S. military veterans or active duty personnel. As such, they offer a number of benefits that are not available to conventional or FHA mortgage holders. First, VA loans are guaranteed by the United States Department of Veteran Affairs. Because they’re backed by a government agency, there’s no need for additional mortgage insurance.

There’s also no minimum credit score, and often no required down payment, making VA loans some of the cheapest and easiest loans for which to qualify.

Some of the drawbacks include the VA funding fee. The amount of the fee paid will depend on how big the down payment was: 2.15% if the down payment was 0%; 1.5% if the down payment was 5% to 9%; and 1.25% if the down payment was 10% or higher. These fees help to keep the system stable by protecting lenders who expose themselves to additional risk.

If you’re a veteran without the income, credit score, or savings needed for a conventional mortgage, your country has your back! We can help you secure the VA loan that can help you achieve homeownership. 

University Federal Credit Union would like to thank all veterans and active duty personnel for their service. If you’re a veteran looking to buy a house, UFCU is here to offer you all of the resources and guidance you need. Apply for a VA loan today with UFCU!

Utah First-Time Homebuyers FAQ

What credit score do you need to buy a house in Utah?

The general rule is that your credit score should be above 620 in order to buy a house. However, this rule is flexible for those applying for FHA or VA loans.

What is the process for purchasing our first home? 

When you speak with one of our mortgage consultants, we’ll go over your budget and find a monthly mortgage payment that is comfortable for you. We will also review your current credit standing to determine where we can improve it in order to help you get the best rates and the lowest costs. With a pre-approval letter in hand, you can begin shopping with your realtor.

Once you have found your dream home, we will guide you through every step of the appraisal, inspection, and closing processes. This includes breaking down all of the costs associated with your purchase, including down payments, closing costs and escrow setup.

We want to make sure that your first-time home buying experience is a positive experience. We do this by staying in constant communication with you throughout the process and by actively ensuring you are well-prepared for every step.

Watch this webinar to learn more about the home buying process:

Still Have Questions? 

If you have more questions about the logistics of first-time home buyer loans, contact our team today. We look forward to helping you secure your new home loan. 

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