First-Time Home Buyers 101

Home ownership brings intangible benefits, such as a sense of stability and pride of ownership, along with the tangible ones of tax deductions and equity.

Owning your own home may seem like a distant dream, but it may be more achievable than you think with a variety of loan options available to first-time home buyers. Your credit score, income level, down payment amount, and how much you can afford to pay per month are all important factors in choosing the loan option that is best for you.

Fixed-Rate Mortgages

This “traditional” type of loan maintains its original interest rate throughout the entire life of the loan. Any change in monthly loan payments will be due to increases in other charges like insurance or real estate taxes that naturally occur over time. Fluctuations in market rates over the term of your loan have NO impact on the amount of interest you pay because that rate is already “fixed.”

Adjustable-Rate Mortgages

An adjustable-rate mortgage, or ARM, is a home loan with an interest rate that fluctuates periodically. This means that the monthly payments can go up or down. Generally, the initial interest rate on an ARM mortgage is lower than that of a comparable fixed-rate mortgage. This allows for a higher loan amount qualification and enhanced buying power. The first figure indicates the number of years the initial interest rate will be fixed. The second figure indicates how often the rate will change after the initial fixed period. Rates are protected by “caps” or limits on how much the rate can change both annually and over the life of the loan.

15/15 Adjustable-Rate Mortgage

At Baltimore County Employees Federal Credit Union, we offer a unique mortgage that combines features from a fixed and adjustable loan. A low interest rate applies for the first 15 years. The rate adjusts once at the 16-year mark and remains fixed for the remaining 15 years. Some of the other benefits of this loan include:

Low initial payments
Payments amortized over 30 years
0% down payment for qualified borrowers*
Free 120-day rate lock**

*Some restrictions and limitations apply
**From the date of application

FHA Loans

Backed by the Federal Housing Administration, these loans accept lower down payments (as low as 3.5%) and flexible credit scores. However, FHA borrowers are required to pay for mortgage insurance.

VA Loans

Designed for eligible veterans and active-duty military members and their qualifying spouses, VA loans are backed by the US Department of Veterans Affairs. They often require no down payment and have other benefits such as limited closing costs and no mortgage insurance requirement.

Down Payment Assistance Programs

If you’re struggling to save up for a reasonable down payment, various government and non-profit organizations may be able to help. These programs provide grants or low-interest loans to eligible homebuyers who meet income and location requirements. Visit the National Council of State Housing Agencies or the National Home Buyers Fund.

Closing Cost Assistance Programs

When you’re budgeting for your new home loan, don’t forget to add in closing costs which can significantly increase your up-front expenses. Nonprofits and government programs often provide grants for closing costs to first-time buyers or low-income individuals, helping them to cover these costs without having to pay them back. Contact your state’s Housing Financing Authority (HFA) to get more information.

Choose the Right Loan

The right loan for you will depend on a number of factors, including your credit score, down payment, monthly payment and debt to income ratio. We’re here to help guide you towards the loan that best suits your needs. We even offer free pre-approvals so you can act quickly with an offer once you find your dream home. Take the first step today and contact a Mortgage Officer at [email protected] or 410-828-4730 x 2.