Best Mortgage Lenders for First-Time Buyers

Start your new life as a homeowner right with the best mortgage lenders. After all, paying for monthly home loan payments is a major part of having a home. That’s why you’d want to make sure to keep the amounts as low as possible. This will make sure it won’t be much of a hassle, so you can allocate the money on other expenses.

You can find so many home loan options nowadays that it’s hard to keep track. On top of that, you have to choose from numerous lenders that offer similar choices. You can put them side-by-side yourself, but who has the time for that? Fortunately, this article can show you the best mortgage lenders for first-time buyers right now!

Here is the list of the best mortgage lenders for first-time buyers:

• AmeriSave Mortgage – Overall best mortgage lender
• Quicken Loans – Best fixed-rate mortgage lender
• Rocket Mortgage – Best adjustable-rate mortgage lender
• Ally Bank – Best jumbo loan lender

AmeriSave Mortgage – Overall best mortgage lender

Quality customer service is doing what we promised we would do 100% of the time. Not just sometimes, ALL the time. pic.twitter.com/jJ0dPGNhOp

— AmeriSave Mortgage (@AmeriSave) September 19, 2021

The internet makes everything so much more convenient than before. Nowadays, you can apply for a mortgage without even stepping foot in a bank or credit union!

Often, you don’t have to make a hard credit inquiry either. Online lenders allow this. That’s why they’re the best mortgage lenders for first-time buyers.

Specifically, you might want to choose AmeriSave Mortgage. It’s an online lender available in Washington, DC, and other US states except for New York.

It delivers the convenience that’s expected from an online lender. AmeriSave lets you handle your loan application online, and it won’t hurt your credit with a hard inquiry.

You can get a new mortgage within minutes with AmeriSave! What’s more, most of the loans start with a minimum 3% downpayment and an APR as low as 2.586%.

AmeriSave Mortgage charges $500 for the application fee. Still, it’s likely a great choice because you won’t have to pay origination fees.

Another great thing about AmeriSave is that it offers more options than other online mortgage lenders. Here are the types of loans it offers:

• Fixed-rate loans
• Adjustable-rate loans
• Cash-out refinancing
• Jumbo loans
• FHA loans
• VA loans
• USDA loans

You can get pre-approved over the AmeriSave website. It also offers live chat with loan officers who can guide you through the mortgage buying process.

This is great if you’re a first-time buyer because you can get assistance if needed. Even better, you can get your application done much quicker than with a regular bank.

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Quicken Loans – Best fixed-rate mortgage lender

If you don’t want to keep paying so much interest to the big banks you should really think about switching to a 15-year fixed with Quicken Loans. If you're paying a mortgage, you shouldn’t go another day without seeing this. (Don’t worry – we're experts!)

— Quicken Loans (@QuickenLoans) May 6, 2019

The next options are for the specific types of loan programs. If you prefer a fixed interest rate for your mortgage, then you might want to check out Quicken Loans.

Like its namesake, Quicken can process your loan application within minutes. What’s more, it lets you reduce your mortgage interest rate. You just have to pay more for discount points.

As a result, you end up paying a higher amount upfront. This could be a good idea if you won’t be staying long in your home too long or if you’re buying your first home.

What makes Quicken Loans one of the best mortgage lenders for first-time buyers? It lists the requirements for its fixed-rate mortgage program.

Other lenders like AmeriSave will only provide that info once you apply for preapproval. That’s highly convenient if you don’t know much about purchasing mortgages.

It’s also great that it has 30-year fixed-rate mortgages. This spaces out the monthly payments as far as possible, so you pay the least at every interval. Here’s what you need to qualify:

• A down payment of at least 3%
• A FICO credit score of 620
• Your debt-to-income (DTI) ratio must be less than 50%. You can compute yours by dividing your monthly debt payments with your monthly income without taxes.
• There is enough money to cover at least 2% to 6% of the purchase price.

Unfortunately, mortgage preapproval from Quicken Loans counts as a hard credit pull. This means it will reduce your credit score, so only do this once you’re sure that you’ll buy a loan.

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Rocket Mortgage – Best adjustable-rate mortgage lender

When it comes to home buying, “pretty sure”… isn’t sure enough. To understand all your mortgage options and be certain about home financing, Rocket Can™. #BeCertain

— Rocket Mortgage (@RocketMortgage) February 8, 2021

An adjustable-rate mortgage (ARM) has an interest rate that changes depending on certain economic conditions. This means your loan payments may go up and down every month.

They often start out charging less interest than fixed-rate options. After that intro period, the interest rate will change based on the lender’s benchmarks and other conditions.

This might be a great choice right now as the United States economy is trying to rebound from COVID’s effects. You might end up paying less every month for your new home!

The terms for an adjustable-rate mortgage can be confusing for first-time buyers, though. Fortunately, Rocket Mortgage can guide you through your purchase.

Like the previous entries, it lets you handle the entire application online. Yet, it lets you speak with one of its mortgage brokers via video call.

AmeriSave and Quicken take minutes, but Rocket needs half an hour. The latter makes up for it by letting you apply at your pace with an expert guiding you.

However, it will perform a hard credit pull when applying for preapproval. Just like with Quicken Loans, you will have to make sure you want to work with Rocket Mortgage beforehand.

Ally Bank – Best jumbo loan lender

.@Ally Home offers mortgage products w/ varying terms & options to serve customers seeking a new loan or refinancing https://t.co/yd29xQwdTW pic.twitter.com/zXTUblb5mG

— Ally Financial (@allyfinancial) December 12, 2016

The Federal Housing Finance Agency (FHFA) limits home loans for each US state. They’re called Conforming Loan Limits, but you may get mortgages that exceed them.

The FHFA refers to them as jumbo loans, which are useful in a competitive housing market. If you’re from the US, you might still be seeing this in action.

Buyers started bidding wars even for properties in average neighborhoods. This could quickly jack up prices, so you may need the extra funding from jumbo loans to secure a purchase.

You might also need a jumbo loan if you want a luxury home as your first humble abode. A regular mortgage might not be able to cover its value.

Fortunately, Ally Bank can process a jumbo loan within a small amount of time. Similar to the previous recommendations, this one lets you do everything online.

According to its website, you could use it for various property types such as vacation homes and investments. What’s more, it offers down payments as low as 10%.

However, it reminds you that you need to prepare 2% to 5% of your loan amount for closing costs. Ally Bank also lets you include refinancing to your loan total.

It’s not higher on the list of the best lenders because of its limited selection. If you just want a jumbo loan, then Ally Bank might just be your friend!

It’s not just a great companion for first-time homebuyers. One of the Inquirer USA articles recommended it as a great online bank for savings accounts.

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What to Do Before Buying a Home?

Before you even pick a type of mortgage, you need to do plenty of other things. First and foremost, you must have a clear reason for why you want to own a home.

It’s the typical American Dream to have a house, but what about your dreams? Do you want one that you can pass on to your kids? Perhaps you need to live closer to your new job?

Make sure to write that down on a piece of paper or a note-taking app. Once you’re set, confirm your latest credit score. It’s the rating that credit bureaus assign to borrowers.

It gauges the likelihood that a borrower repays his loan on time. The bureaus base it on information from banks and credit unions.

In turn, credit ratings help these institutions match borrowers with the right loans. You can check your latest score by getting a free credit report from the Federal Trade Commission (FTC).

After that, you must determine how much you can spend on a new home. Consider the upfront lender fees, down payments, closing costs, and plan monthly payments.

First-time buyers may get ideas from the best lenders listed in this article. See the loan terms and conditions, so you can see how much your new home will cost.

They’re not the only sources of loan products and services. You might want to check out other mortgage brokers and financial institutions like Bank of America.

How to Pick the Right Mortgage Type?

After budgeting, it’s time to pick a loan. As you’ve noticed, the list of the best lenders has a recommendation for each type. Let’s talk more about them below:

• Fixed-rate mortgages maintain the same interest rate throughout the life of the loan. This might be best for first-time buyers who want predictable monthly payments. Still, the other types can become cheaper depending on real estate market conditions.
• Adjustable-rate mortgages or ARMs often maintain a steady interest rate for a few years. After that, it will shift based on market conditions. If they’re good, then it might be a great time to have them.
• Conventional loans are mortgages that aren’t part of any government programs. They can have a fixed-rate or adjustable-rate interest. Conventional home loans may also follow the Conforming Loan Limits or exceed them as jumbo loans.
• Government-based loans often come from the USDA, FHA, and VA. These loans have fixed interest rates, and they require lower credit scores and down payments than other mortgages. However, you’ll have to meet certain conditions, such as serving in the military or purchasing a home in a rural area.
• Jumbo loans are much larger than others, so they’re often used to buy luxury homes. You might need them when house prices are soaring rapidly. The extra funds could help you secure a purchase before the prices rise again.

How to Choose a Mortgage Lender?

Next, you should choose the right lender. Similar to choosing home loans, you have to know the types available. Read more about them below:

• Direct lenders use their money to originate and underwrite loans. They don’t need help from third parties, and their buying process is often much quicker than others. Direct lenders are more often known as banks.
• Mortgage brokers are licensed professionals who help homeowners sell their homes. They have connections with numerous lenders to recommend the best ones.
• Nonbank mortgage lenders don’t have banking services, so they use lines of credit to fund loans. They became popular after the Great Depression because of their flexible rates and quick loan approvals.
• Mortgage marketplaces are like brokers, but they’re online platforms instead of people. You may head there to look at hundreds of potential lenders.

The list of the best lenders for buyers can help you choose. Still, it’s a good idea to make your search easier with the following steps:

1. Look beyond the interest rates promoted on their homepages. See if you can get a loan that charges less interest and verify its terms and conditions.
2. Check how the lender communicates with lenders. If you’ve noticed, this article’s list of the best loan lenders has some way of reaching their staff. This is to ensure that first-time buyers can get the assistance they need.
3. Find out the lender’s client services, such as loan process tracking and mobile app. Those could affect your purchasing experience and the amount you’ll pay for the loan.
4. Read reviews about the lenders. Aside from this article, the internet has many other websites that comment about lenders. Most of them come from past customers so you can choose one based on their first-hand experience.

Final Thoughts

As a first-time buyer, you may want to consider this list of lenders. Choose one based on your home purchase goals. You may also refer to this article for further information.

If you can’t find one that suits you, feel free to search other websites. Find as many options as possible to find the best one.

You may also read other Inquirer USA articles to learn more about buying homes. What’s more, they will keep you up-to-date with the latest trends around the world.

FAQs

How can first-time buyers improve their chances of getting approved for a mortgage?

To enhance your chances of mortgage approval as a first-time buyer, there are a few key steps you can take. Firstly, it’s important to maintain a good credit score. This can be achieved by paying bills on time, minimizing debt, and avoiding new credit applications. Lenders typically prefer borrowers with a strong credit history as it indicates their ability to manage their finances responsibly.

Secondly, saving up for a down payment can significantly improve your chances of approval. A larger down payment not only reduces the amount you need to borrow but also demonstrates financial responsibility to lenders.

Thirdly, gather and organize your financial documents. Lenders require documentation such as tax returns, bank statements, and employment records to assess your eligibility. By being prepared and having these documents readily available, you can streamline the application process.

Lastly, consider getting pre-approved for a mortgage. This involves submitting your financial information to a lender who will assess your creditworthiness and determine the maximum loan amount you qualify for. Being pre-approved shows sellers that you are a serious buyer and can strengthen your negotiating power when making an offer on a property.

What are some common mistakes to avoid when choosing a mortgage lender for first-time buyers?

When selecting a lender as a first-time buyer, it’s crucial to avoid certain pitfalls. One mistake to steer clear of is failing to shop around. It’s important not to settle for the first lender you come across. Take the time to compare rates, fees, and loan terms from multiple lenders to ensure you’re getting the best possible deal.

Additionally, overlooking customer reviews can be a costly mistake. Neglecting to research the lender’s reputation and customer feedback may lead to unpleasant surprises down the line. Take the time to read reviews and gain insights into the lender’s reliability and customer service.

Another common error is ignoring hidden fees. Thoroughly review the lender’s fee structure, paying attention to potential hidden fees such as origination fees, closing costs, or prepayment penalties. Understanding the full cost of the loan is essential for making an informed decision.

Additionally, don’t neglect to ask questions. Clear communication is key in the borrowing process, so don’t hesitate to ask your potential lender about the loan process, eligibility requirements, or any concerns you may have. Lastly, avoid the mistake of solely focusing on interest rates. While interest rates are important, it’s vital to consider other aspects such as customer service, loan options, and the lender’s expertise in serving first-time buyers. Taking a holistic approach to lender selection will help ensure a smooth and satisfactory borrowing experience.

Are there any special incentives or benefits for first-time buyers offered by mortgage lenders?

Yes, lenders often offer special incentives and benefits specifically designed for first-time buyers. These include down payment assistance programs that provide financial support to help reduce upfront costs. Some lenders also offer lower down payment options, allowing first-time buyers to enter the housing market with less cash upfront.

Additionally, lenders may have more flexible credit requirements, considering alternative credit data or being more lenient with credit scores to make it easier for those with limited credit histories to qualify for a mortgage. Many lenders provide educational resources, workshops, or online tools to help first-time buyers understand the mortgage process, budgeting, and financial management.

Furthermore, lenders experienced in serving first-time buyers often offer dedicated support, providing personalized guidance throughout the mortgage process and addressing any questions or concerns. It is crucial for first-time buyers to conduct research and compare the incentives and benefits offered by different lenders to find the ones that best align with their specific needs and financial goals.

Published on February 3, 2022; Updated on June 27, 2023.