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Best Mortgage Lenders for First-Time Home Buyers of July 2022

Many or all of the products here are from our partners that pay us a commission. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.

When it comes to buying your first home, the thought of getting a mortgage can seem even more intimidating than shopping and negotiating. But we've got you covered. Here's a look at some of the best mortgage lenders for first-time home buyers, and a primer on what you should know before you get started in the application process.

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Best for: No lender fees and online application

Bottom Line

Has the right combination of features and perks, including no origination fees, low mortgage rates, and an online experience that helps homeowners cut their costs while saving time. Case in point, borrowers can secure preapproval in minutes. The lender also offers $150 off closing costs when applying through The Ascent site.

Min. Credit Score

  • 620

Min. Down Payment

  • 3%

Key Features

  • No origination fees
  • Instant loan estimates
  • 100% online application
  • $150 off closing costs for The Ascent readers
  • Better Cash offer

Loan Types

  • Conventional
  • FHA
  • Jumbo

Fixed Rate Terms

  • 30y, 20y, 15y

Adjustable Rate Terms

  • 10/6, 7/6, 5/6
Diverse loan terms

Best for: Diverse loan offerings and relationship discounts

Bottom Line

Few lenders can match the lineup of loan products and terms, and the bank is a great solution for first-time homebuyers. The high-tech digital experience compliments the bank's extensive branch network. The interest rate and fee discounts for Preferred Rewards members define what relationship banking should look like.

Key Features

  • Relationship interest rate and fee discounts
  • Ability to apply entirely online
  • No PMI offering
  • Loans up to $5 million

Loan Types

  • Conventional
  • FHA
  • VA
  • Jumbo

Fixed Rate Terms

  • 30y, 20y, 15y

Adjustable Rate Terms

  • 10/6, 7/6, 5/6

Award Icon BEST OF 2022
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Best for: Loan options and online application

Bottom Line

Led the transition to online-only applications, and that seamless process is one reason why it has become the largest U.S. lender. Consistent No. 1 J.D. Power customer service rankings and its high-quality app make it hard to ignore.

Key Features

  • Online-only
  • High allowable debt-to-income
  • Low down payment options

Loan Types

  • Conventional
  • FHA
  • VA
  • Jumbo

Fixed Rate Terms

  • Customizable (8y-30y)

Adjustable Rate Terms

  • 10/6, 7/6, 5/6
Diverse loan terms

Best for: First-time home buyers

Bottom Line

The diverse set of loan products and terms and relationship discounts make it a top pick, particularly for first-time homebuyers and people interested in FHA loans. The high customer satisfaction ratings are the cherry on top.

Key Features

  • No PMI mortgage
  • High customer satisfaction
  • Available in all 50 states

Loan Types

  • Conventional
  • FHA
  • VA
  • Jumbo

Fixed Rate Terms

  • 30y, 15y

Adjustable Rate Terms

  • 10/1, 7/1, 5/1

Key Features

  • No income loan offering
  • Uses expanded credit criteria
  • Diverse terms and loan products

Loan Types

  • Conventional
  • FHA
  • VA
  • USDA
  • Jumbo

Fixed Rate Terms

  • 30y, 15y

Adjustable Rate Terms

  • 10/1, 7/1, 5/1

Best for: Customer service

Bottom Line

SunTrust earns top honors for customer service and the entire approval process can be done over the Internet, however it only has physical branches in 12 states and charges a 1% one-time guarantee fee.

Key Features

  • Customizable fixed terms
  • Streamlined online application process with the option for in-person help
  • Top ratings for customer service.

Loan Types

  • Conventional
  • FHA
  • VA
  • USDA
  • Jumbo

Fixed Rate Terms

  • Customizable (10y-30y)

Adjustable Rate Terms

  • 5/1, 7/1, 10/1

Key Features

  • 3% down no PMI offering
  • HELOC's
  • Home equity loans
  • Considers nontraditional credit history

Loan Types

  • Conventional
  • FHA
  • VA
  • USDA
  • Jumbo

Fixed Rate Terms

  • 30y, 25y, 20y, 15y, 10y

Adjustable Rate Terms

  • 10/1, 7/1, 5/1

Ratings methodology

The mortgage market is crowded and competitive, which is great for consumers. Keeping that in mind, we take our ratings and picks very seriously. While it’s impossible for us to rate and review every offer on the market, we canvas as far as we can. Our five-star rating system takes into account how competitive rates and fees are for a certain lender, the online experience and customer support, as well as how versatile a loan is including repayment terms, availability, downpayment options, and more.

What types of loans are available for first-time home buyers?

Many first-time home buyers don't have excellent credit histories, and many others don't have large down payments available. Some have served in the Armed Forces and can access VA loans, while others might be able to explore USDA financing if their homes are in certain rural areas.

With that in mind, here's a quick overview of the four major mortgage types first-time home buyers can use.

Conventional mortgages

The majority of purchase mortgage loans in the United States are known as conventional loans. This is a broad term that refers to loans that aren't guaranteed by a government agency. The lack of a guarantee means that conventional mortgages generally have stricter qualification requirements than the other loan types listed here. But they could still be excellent options for first-time buyers with strong credit scores. There are several conventional mortgage programs for first-time buyers that allow for down payments as low as 3% of the purchase price. Find out more in our guide to buying your first home.

FHA loans

FHA mortgage loans are guaranteed, or insured, by the Federal Housing Administration (FHA). Because of this guarantee, credit requirements are generally looser than other types of mortgages, and down payments can be as low as 3.5%, even with a relatively low credit score. While there are a few drawbacks to FHA loans, especially when it comes to costs, they can be a great way for buyers who don't have stellar qualifications to become homeowners.

Compare lenders: Best FHA Lenders

Compare rates: Today's FHA Mortgage Rates

VA loans

A VA loan is a mortgage that is backed by the U.S. Department of Veterans Affairs, and these are available to certain military members, both past and present. VA loans have no down payment requirement, low interest rates, and flexible credit qualifications, so they are definitely worth looking into if you qualify.

Compare lenders: Best VA Loan Lenders

Compare rates: Today's VA Loan Rates

USDA loans

A USDA loan is a mortgage that is guaranteed by the U.S. Department of Agriculture. To qualify, a home must be in an eligible rural area, and the borrower's income must be below certain limits. If both borrower and property qualify, USDA loans don't require any down payment whatsoever.

It's also important to mention that in addition to these types of loans, many lenders have their own proprietary mortgage products, and some are specifically designed for first-time home buyers. So it could also be a great idea to research the options offered by some of the best mortgage lenders as well as your local and regional financial institutions.

Compare lenders: Best USDA Mortgage Lenders

For more information on choosing the best mortgage for you, watch the video below.

How do I qualify as a first-time home buyer?

There aren't any specific requirements that only apply to first-time buyers (unless a particular loan product has a separate credit or down payment requirement for first-timers). For the most part, first-time buyers are subject to the same general requirements that all mortgage applicants face.

Having said that, first-time buyers are less likely to know what to expect than seasoned homeowners. So here are the general categories of information your mortgage lender will consider when you apply for a mortgage for your first home.

Credit

Before verifying any of your other qualifications, lenders will typically run a credit check. Virtually all mortgage lenders use the FICO credit scoring model, and most will pull your scores from all three major credit bureaus and use the middle number for qualification purposes. FHA loans require a minimum 580 FICO® Score for a 3.5% down payment, while conventional loans have a minimum of 620.

Down payment

Unless you're using a VA or USDA loan to finance your home, you'll need a down payment. FHA and conventional loans have low down payment options, and funds can usually come from a gift. But you'll need to document what funds you have for your down payment and where they came from, as well as how you plan to pay for any closing costs.

Debt-to-income ratio

Simply put, lenders want to make sure you'll be able to afford your mortgage payments, so they'll look at your debt obligations as a percentage of your income, a metric known as your debt-to-income ratio, or DTI ratio. Methods of calculating DTI and lending standards can vary, but a good rule of thumb is that your total monthly debt obligations (including your new mortgage payment) should be no more than 45% of your pre-tax income. However, there are exceptions, so if you feel you can comfortably afford to have a higher DTI ratio, don't be discouraged. In fact, FHA lenders will allow you to have a DTI as high as 57% in some cases!

Employment

Lenders want to know that not only can you afford your mortgage payments for now, but that you'll also be able to keep paying your mortgage year after year. Most mortgage lenders want to see at least two years of steady employment in the same field (but not necessarily with the same employer). There are exceptions, however -- such as if you graduated from college less than two years ago.

Assets/reserves

Depending on the mortgage loan you select, as well as your other qualifications, your lender is likely to require a certain amount of money in reserves. This can be as little as two months' worth of mortgage payments. The point is that you typically can't end up with a zero balance in your bank account after closing on your home.

Before you apply for a mortgage, it makes sense to ensure each of these are as good as possible. For example, taking some time to raise your credit score and save a higher down payment could help you snag a better interest rate, which will save you money in the long run.

Choosing the best lender for first-time home buyers

The first step in choosing the best mortgage lender for your first home purchase is to get a good understanding of how home loans work. Then you'll need to narrow down a short list of a few (say, three or four) lenders with products and resources that meet your needs. Our best first-time mortgage lender list on this page is a good place to start, but it could also be a smart idea to check out your local and regional banks or credit unions so that you can compare mortgage rates. If you're looking for a digital application process, be sure to check out our list of the best online mortgage lenders.

Once you have a short list, apply for a mortgage with all of them to compare the specific loan terms and fees that you get offered. It won't hurt your credit score to do this, as all mortgage-based credit inquiries that take place within a typical shopping period are counted as just a single inquiry. You'll see a range of interest rates, fees, and APRs from different lenders, and you'd be surprised at how much this can save or cost you over the life of a 30-year mortgage loan.

Lender Rating Best For
Rating image, 4.5 out of 5 stars.
Best For: No lender fees and online application
Rating image, 5.0 out of 5 stars.
Best For: Diverse loan offerings and relationship discounts
Award Icon BEST OF 2022
Rating image, 5.0 out of 5 stars.
Best For: Loan options and online application
Rating image, 4.5 out of 5 stars.
Best For: First-time home buyers
Rating image, 4.5 out of 5 stars.
Best For: No mortgage insurance option
Rating image, 4.0 out of 5 stars.
Best For: No income requirement offering
Rating image, 4.0 out of 5 stars.
Best For: Customer service
Rating image, 4.0 out of 5 stars.
Best For: Diverse loan offerings

FAQs

  • First-time home buyers should shop around to find the best lender for their mortgage. Look for the most competitive rates, loan terms, down payment requirements, and fees. Buyers should also look to see what types of loans a lender offers, who they will be working with, the average loan processing time, and customer service ratings.

  • First-time home buyers can get loans through different programs. The federal government offers a low down payment loan through the Federal Housing Administration (FHA), Veteran Affairs (VA), and The U.S. Department of Agriculture (USDA). First-time home buyers can also get a low down payment conventional loan through Fannie Mae and Freddie Mac. In addition, many states and local governments offer first-time home buyers loans. Non-profit organizations, certain employers, and other financial institutions also offer first-time home buyer loans.

  • There are many different types of loans you can get as a first-time home buyer. There are loans to assist with the down payment, down payment assistance (DPA) grants, government-backed loans, conventional loans offered through financial institutions, as well as loans through charities, non-profits, and employer-sponsored loans.

  • It depends on the buyer, but if you don't have a large down payment or you don't have an established credit history, a FHA loan could be the best way to get into your first home. FHA loans require just 3.5% down for most borrowers and have lower credit scoring requirements than any other major home loan type.

  • Depending on your circumstances, you might be able to get a loan for your first home with little or no money down. USDA and VA loans both have no down payment requirement, and some banks offer their own first-time buyer loans with 0% down. FHA loans require 3.5% down for most borrowers, and it's possible to get a conventional mortgage with as little as 3% down.

    Having said that, a higher down payment can reduce your monthly mortgage payments and, depending on your loan type can either reduce or eliminate your private mortgage insurance expense.

  • For most buyers, an FHA loan is the easiest to get approved for. Borrowers with 10% down payments can get approved with credit scores as low as 500, and the down payment requirement drops to 3.5% for borrowers with FICO® Scores of 580 or higher. These are the lowest credit scoring requirements for the major types of mortgages. On the other hand, if you have a high credit score or have served in the Armed Forces, a conventional or VA loan can be just as "easy" to get.

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