Mon. Oct 2nd, 2023

    The Best Mortgage Lenders for First-Time Buyers of June 2023

    Our experts answer readers’ home-buying questions and write unbiased product reviews (here’s how we assess mortgages). In some cases, we receive a commission from our partners; however, our opinions are our own.

    First-time homebuyers often need extra help or affordable mortgage solutions to get them through the mortgage process. That’s why it’s important to have a lender that is equipped to meet their unique needs.

    All of our top picks allow low down payments and thrive in customer satisfaction and affordability. Many have special features such as down payment assistance that can help make homeownership even more affordable.

    The Best Mortgage Lenders for First-Time Buyers of 2023

    Guild Mortgage – Product Name Only: Best overallBank of America Mortgage – Product Name Only: Best for down payment assistanceChase Mortgage – Product Name Only: Best for low-income borrowersNavy Federal Credit Union Mortgage – Product Name Only: Best for veteransNew American Funding – Product Name Only: Best for FHA loansU.S. Bank Mortgage – Product Name Only: Best for student loan borrowersAlliant Credit Union Mortgages – Product Name Only: Best for no down paymentBetter Mortgage – Product Name Only: Best onlineCarrington Mortgage Services – Product Name Only: Best for low credit scoresThird Federal Savings and Loan Mortgage – Product Name Only: Best for low closing costs

    The Best Mortgage Lenders for First-Time Buyers

    Experts’ Advice for First-Time Homebuyers on Choosing a Mortgage Lender

    To help you learn more about homebuying, mortgages, and lenders, four experts weighed in:

    Anthony Park, author of “How to Buy Your Perfect First Home”Lauryn Williams, certified financial planner, founder of Worth Winning Financial PlanningJulie Aragon, mortgage broker, founder of Aragon Lending TeamMolly Grace, mortgage reporter at Personal Finance Insider

    Here’s their advice about how to evaluate mortgage lenders, and how to decide which type of mortgage is best for you. (Some text may be lightly edited for clarity.)

    What factors should someone take into consideration when choosing a mortgage lender?

    Anthony Park, author:

    “The canned answer is to just go with the lowest rate. However, you also want to take into account who’s going to serve your loan best. Are repayments going to be easy for you? Who is most likely to be able to help you if you need to take out a HELOC or refinance later, versus somebody who’s more of a one-off type?

    “They may have the lowest rates to get you involved, but they might have very, very little hand holding after the fact. I wouldn’t recommend paying an exorbitant amount more for potential services in the future, but just don’t always necessarily go with the rock-bottom lowest rate. There’s sometimes a cost with that.”

    Molly Grace, Personal Finance Insider:

    “Remember that you’re not just choosing a mortgage lender — you’re also building a homebuying team. To snag the home you want in this competitive market, you need a lender that can move quickly and has good communication with you and your real estate agent.

    When I was looking for a house, I was able to text my loan officer (whom my real estate agent recommended) and get quick replies when I had questions or needed an updated preapproval letter for an offer. As you compare lenders, pay attention to how responsive they are, and ask your agent if they have any experience with the lenders you’re considering.”

    How can someone decide between a conventional mortgage vs. a government-backed mortgage?

    Molly Grace, Personal Finance Insider

    “An FHA mortgage is a really helpful option for borrowers with low scores or kind of rocky credit histories. But if you have great credit, you may get a better rate and pay less for mortgage insurance on a conventional mortgage. 

    VA mortgages are really great deals. If you qualify for one, you should definitely go for it. You get zero down with no mortgage insurance — plus some of the best rates available.”

    Julie Aragon, Aragon Lending Team:

    “The most common government loan that’s widely available to almost everyone is the FHA loan. There’s a couple of reasons why somebody would go with FHA instead of conventional one. Their credit is a little on the crummy side, let’s say below 700. You can get conventional with down to a 620 score, but the mortgage insurance gets really expensive. FHA doesn’t discriminate — no matter how perfect or crappy your credit is, the mortgage insurance is the same.”

    How can someone know whether they’re financially ready to buy a home?

    Lauryn Williams, CFP:

    “You should have funds left over after everything is said and done as it pertains to purchasing the home. So if you don’t have an emergency fund plus a down payment, you’re probably not ready to purchase a home. Another thing I think about is credit card debt. While you can be approved for a mortgage with credit card debt and student loans and very little cash on hand, you put yourself in a very risky situation.”

    Molly Grace, Personal Finance Insider

    “You have to be ready to dedicate a chunk of your budget to homeownership — and I don’t mean your mortgage payment. When you own your house, there’s always something that needs taking care of, especially in the first year. We got to our new house on moving day to find that the A/C was out. We paid $700 to have it fixed.”

    Methodology: How We Chose the Best First-Time Buyer Mortgage Lenders for 2023

    To choose the top mortgage lenders of June 2023, we looked at four main factors:

    Loan types. Did a lender offer several types of loans to suit customers’ needs, such as conventional loans (including conforming and jumbo) and government-backed loans?Customer satisfaction. If the lender appeared in the J.D. Power 2022 Primary Mortgage Origination Satisfaction Survey, we looked at its ranking. If it wasn’t in the survey, then we read online customer reviews.Affordability. We looked at lenders’ minimum credit scores and down payment amounts. We also checked whether they offer government-backed loans, which can be more affordable for borrowers with less-than-perfect financial profiles. Finally, we looked at whether it has flexible credit requirements, such as accepting non-traditional credit from borrowers with no scores or considering borrowers with recent negative events on their credit reports.Ethics. Many of our top picks received an A- or better from the Better Business Bureau, which measures companies’ trustworthiness.

    We also looked closely at lenders with programs specifically for first-time buyers, such as down payment assistance. Most of our top picks have features that benefit first-time buyers, and those that don’t made the list because they thrived in other criteria.

    See our full methodology for evaluating mortgage lenders »

    Mortgages for First-Time Buyers Frequently Asked Questions

    What type of loan is best for a first-time homebuyer?

    An FHA mortgage is often the best mortgage for a first-time buyer. FHA mortgages appealing to people whose finances aren’t in the best shape yet, since the minimum credit score needed to get one is 580. If you have a 10% down payment, you could even qualify with a score as low as 500.

    However, the best loan will depend on your situation. With a high credit score and low DTI ratio, you may find that you’re eligible for competitive terms on a conventional mortgage, which includes both conforming and jumbo mortgages for borrowing larger amounts.

    If you are an active military member or veteran, you can buy a home with no down payment with a VA mortgage. A USDA mortgage is also good for buyers who live in rural areas and earn a low-to-moderate income.

    What is homebuyer assistance?

    Homebuyer assistance usually refers to money that helps you cover a down payment or closing costs. The lender may give you a grant that you don’t have to pay back, or a small loan that has better terms than a regular mortgage. Some homebuyer assistance programs forgive your loan under certain circumstances — for example, the amount you have to pay back decreases the longer you live in the home and is wiped away once you live in the home for five years.

    Best Mortgage Lender Overall for First-Time Homebuyers

    Guild Mortgage – Product Name Only

    The bottom line: Guild Mortgage offers many extra features that make it our favorite lender for first-time buyers, including flexible credit requirements, a convenient application process (including the ability to complete the process online or in-person at one of its physical branches), and digital closing capabilities. Plus, this lender can connect you with down payment assistance programs in your area. 

    If you don’t have a credit history, Guild’s Complete Rate program lets you use rent payment history to apply. It also offers a hybrid closing that lets you sign most of your documentation ahead of time, so you’ll have a quick closing appointment.

    It’s also a top lender for customer satisfaction; in 2022, it ranked above the industry average in J.D. Power’s annual Mortgage Origination Satisfaction Study.

    Guild has an A+ rating from the BBB.  

    Guild Mortgage Review

    Best Mortgage Lender for Down Payment Assistance for First-Time Homebuyers

    Bank of America Mortgage – Product Name Only

    The bottom line: Bank of America is one of our favorite big bank mortgage lenders for first-time homebuyers. It offers significant financial assistance, and its new Community Affordable Loan Solution is one of the most generous programs of its kind.

    Bank of America offers down payment assistance up to $10,000 and closing cost assistance up to $7,500. This makes it a particularly attractive lender for first-time homebuyers, who often have trouble coming up with enough cash to cover these costs. Additionally, if you’re already a Bank of America customer, you may be able to receive a discount on your origination fee.

    Bank of America’s new Community Affordable Loan Solution removes many of the barriers that traditionally have kept people from becoming homeowners. With this mortgage, you can buy a home with no down payment and no closing costs, and use non-traditional credit (such as proof of on-time rent or utility payments) to qualify.

    The Community Affordable Loan Solution mortgage is available only in certain markets, including some historically Black and Hispanic neighborhoods in Charlotte, Dallas, Detroit, Los Angeles, and Miami

    This lender has an A+ rating from the BBB and ranked above average on J.D. Power’s 2022 Primary Mortgage Origination Satisfaction Study.

    Bank of America Mortgage Review

    Best Mortgage Lender for First-Time Homebuyers With Lower Incomes

    Chase Mortgage – Product Name Only

    The bottom line: Chase is a strong mortgage lender overall, especially if your income is low enough to qualify for the DreaMaker mortgage. But you’ll need a decent credit score to qualify with this lender.

    The DreaMaker mortgage is one of Chase’s strongest offerings, helping middle-to-low-income borrowers get into a home with 3% down and flexible credit requirements. Its Homebuyer Grant program also gives out up to $2,500, or $5,000 to borrowers in low-income or majority-Black areas.

    Chase has an A- rating from the Better Business Bureau and ranked No. 2 in the J.D. Power 2022 Mortgage Origination Satisfaction Study.

    Chase Mortgage Review

    Best Mortgage Lender for Veterans Who are First-Time Buyers

    Navy Federal Credit Union Mortgage – Product Name Only

    The bottom line: Navy Federal is a good option for people affiliated with the military, especially if you’re searching for a lender that’s friendly to people who have low credit scores and little money for a down payment.

    Navy Federal offers several affordable mortgages beyond its VA loan, including a Homebuyers Choice mortgage, which is a conventional loan with no down payment required and no mortgage insurance. This lender also accepts alternative credit data, such as utility bills.

    Navy Federal has an NR (No Rating) from the BBB because it’s in the process of responding to previously closed complaints. It received a high score from J.D. Power, but didn’t rank in the annual customer satisfaction study because it doesn’t meet certain criteria.

    You can only become a member of Navy Federal Credit Union if you or your family is affiliated with the military, you are a Department of Defense civilian personnel or contractor, or you live with a Navy Federal member. 

    Navy Federal Credit Union Mortgage Review

    Best Mortgage Lender for FHA Loans If You’re a First-Time Buyer

    New American Funding – Product Name Only

    The bottom line: New American Funding is a good mortgage lender overall, and its FHA loans are a particularly strong choice for first-time homebuyers with limited or rocky credit histories.

    New American Funding allows scores below 580 on its FHA loans and will consider non-traditional credit from borrowers who don’t have a score. You may also be able to get an FHA loan from this lender if you have a recent negative event, such as a bankruptcy or foreclosure, on your credit report.

    New American Funding has an A+ rating from the BBB.

    New American Funding Mortgage Review

    Best Mortgage Lender for Student Loan Borrowers Who are First-Time Buyers

    U.S. Bank Mortgage – Product Name Only

    The bottom line: US Bank offers a variety of mortgages, including its American Dream Loan, which is geared toward low-income borrowers. US Bank says it will work with student loan borrowers on income-driven repayment plans for this mortgage.

    US Bank’s American Dream Loan comes with a 3% down payment, no mortgage insurance, and it allows non-traditional credit if you don’t have a credit score. You’ll also get up to $10,000 in down payment and closing cost assistance with this mortgage.

    This lender is also a good option if you already have an account with US Bank, as you could get up to $1,000 off your closing costs.

    US Bank currently has a A- rating from the BBB. It ranked below average in J.D. Power’s annual study.

    US Bank Mortgage Review

    Best Mortgage Lender for First-Time Buyers With No Down Payment

    Alliant Credit Union Mortgages – Product Name Only

    The bottom line: Alliant Credit Union is a good option for first-time borrowers with decent credit scores. But you’ll need to become a member to qualify.

    This lender’s Alliant Advantage Mortgage lets first-time homebuyers put 0% down with no mortgage insurance, making it an incredibly affordable option for those who qualify. 

    Alliant Credit Union has an A+ rating from the BBB.

    Alliant Credit Union Mortgage Review

    Best Online Mortgage Lender for First-Time Buyers

    Better Mortgage – Product Name Only

    The bottom line: Better.com is an affordable lender and a good choice for borrowers who value a quick and convenient online application process. 

    Better.com charges no lender fees, making it an affordable option for those looking to keep their closing costs down. It also offers a preapproval that takes just a few minutes to complete and gives you the ability to easily see personalized rates without providing contact information.

    Better.com has a B rating from the BBB. It ranked below average in J.D. Power’s 2022 customer satisfaction study.

    Better Mortgage Review

    Best Mortgage Lender for First-Time Buyers With Low Credit Scores

    Carrington Mortgage Services – Product Name Only

    The bottom line: Carrington Mortgage Services has mortgages that allow credit scores as low as 500. It also has options for borrowers with recent bankruptcies or foreclosures.

    This lender has some of the best flexible credit options out of all the lenders on this list. With Carrington Mortgage Services, you can get a government-backed mortgage with a credit score as low as 500, or a Carrington Flexible Advantage mortgage with a score as low as 550 or recent negative events on your credit report.

    Carrington Mortgage Services has an NR (“no rating”) from the BBB.

    Carrington Mortgage Services Review

    Best Mortgage Lender for Low Closing Costs for First-Time Buyers

    Third Federal Savings and Loan Mortgage – Product Name Only

    The bottom line: Third Federal Savings and Loan offers a huge range of perks for its mortgage borrowers. With the lender’s Low Cost Mortgages, borrowers will only pay $295 in closing costs in exchange for taking on a slightly higher interest rate.

    Third Federal is a great lender for first-time buyers who have good credit but don’t have a lot of cash to bring to the transaction. With this lender, first-timers can get up to $13,000 in down payment assistance and make down payments as low as 5% without having to pay mortgage insurance.

    Third Federal has an A- rating from the BBB.

    Third Federal Savings and Loan Mortgage Review

    Other Mortgage Lenders We Considered

    We evaluated over two dozen mortgage lenders before picking our favorites. Here are the other lenders we looked at and reasons they didn’t make the cut:

    Guaranteed Rate: This lender has an easy-to-use interface and lets you close digitally, but it doesn’t have first-time homebuyer assistance like many of our top picks.Pentagon Federal Credit Union: If you have a 650 credit score, PenFed offers $500 to $2,500 in lender credit for all members, depending on how much you borrow. The credit union doesn’t have FHA or USDA mortgages, though.USAA: USAA only offers VA mortgages right now.LoanDepot: LoanDepot is a solid lender, but it doesn’t have any features that set it apart from the crowd.Wells Fargo: The lender does have homebuyer assistance for lower-income buyers. However, Wells Fargo has had multiple public controversies over the past few years regarding claims of racist lending practices, creating fake bank accounts, and charging customers for insurance products they didn’t sign up for.Caliber Home Loans: Caliber doesn’t have any first-time homebuyer assistance programs.Fairway Independent Mortgage Corporation: This is a strong lender overall, but it doesn’t have products geared toward first-time buyers like some of our top picks.Truist: This lender has a few different low down payment options, including one without mortgage insurance. However, it ranked below average in customer satisfaction according to J.D. Power.Veterans United: Veterans United offers several types of mortgages, not just VA mortgages. It doesn’t have any programs for first-time buyers, though.CMG Financial: CMG has unique grant opportunities and mortgages. They could be good options, but these programs aren’t for everyone.Freedom Mortgage: This is a good lender if you have a low credit score, but you can’t fill out an application online.Flagstar Bank: This lender offers several types of home loans, but none of its features make it stand out.Movement Mortgage: Movement Mortgage will process your mortgage within seven business days. It doesn’t have any homebuyer assistance programs, though.Ally: Ally has a convenient online process, but it only offers conventional mortgages.NBKC Bank: NBKC is an overall good mortgage lender, but you’ll need a good credit score.PNC Bank: PNC’s offerings aren’t as strong as what you can get from the lenders we picked.Rocket Mortgage: Rocket Mortgage ranks high in customer satisfaction, but it has few features that would make it worthwhile for a first-time buyer.

    Are These Mortgage Lenders Trustworthy?

    The Better Business Bureau grades companies based on responses to customer complaints, honest advertising, and transparency about business practices. Here are the BBB grades for our top lenders:

    LenderBBB gradeGuild MortgageA+Bank of AmericaA+ChaseA-Navy Federal Credit UnionNRNew American FundingA+US BankA-Alliant Credit UnionA+Better.comBCarrington Mortgage ServicesNRThird Federal Savings and LoanA-

    Most of the lenders have an A rating or better from the BBB. Chase has an A- rating due to unresolved complaints. Navy Federal and Carrington have an NR (No Rating) because they are responding to previously-closed customer complaints. US Bank has an A- due to government action. Better.com has a B rating due to complaints filed against the lender. Third Federal has an A- rating because it failed to respond to three complaints filed against the business.

    In 2020, Guild Mortgage paid the United States $24.9 million when it was accused of approving FHA mortgages for people who didn’t qualify, resulting in loan defaults.

    Some of the other lenders on our list have recent public controversies, too, despite their strong BBB grades.

    In 2020, the Department of Justice charged Bank of America for unfairly denying home loans to adults with disabilities, even though they qualified for loans. Bank of America paid around $300,000 total to people who were refused loans.

    The Department of Justice required JPMorgan Chase to pay $920 million for wrongful trading in 2020.

    Navy Federal employee has claimed the lender pressured mortgage underwriters to approve loans even if they didn’t have sufficient reason to believe applicants could repay the loans. Then she filed a lawsuit and said Navy Federal retaliated against her whistleblowing by changing her job duties. She dropped the case in late 2020.

    Better.com’s founder and CEO Vishal Garg has been accused of fostering a hostile workplace at Better.com and of engaging in fraud with some of his previous startups. He also laid off around 900 employees over Zoom in late 2021.

    In 2020, US Bank paid the US government $200 million when it was accused of approving FHA loans for mortgage insurance even though either a) borrowers didn’t meet requirements for FHA loans, or b) US Bank didn’t check their credit scores. In 2022, US Bank settled allegations from the Consumer Financial Protection Bureau that it illegally accessed customer credit reports and opened accounts without customer permission.

    In November 2022, the Consumer Financial Protection Bureau ordered Carrington to pay $5.25 million in fines for supposedly violating borrowers’ CARES Act rights. The CFPB claims that the lender misled borrowers seeking CARES Act forbearance and denied them key protections provided by the pandemic-era law.

    Additional Resources and Programs for First-Time Homebuyers

    You may qualify for a program specific to your state or county. These often come in the form of down payment/closing cost assistance or tax benefits.

    You could receive assistance if you buy a home that needs major renovations, including a Fannie Mae HomeStyle loan, Freddie Mac CHOICERenovation loan, FHA 203(k) loan, and the Energy Efficient Mortgage program.

    You may qualify for the Department of Housing and Urban Development’s Good Neighbor Next Door program if you’re a teacher, firefighter, law enforcement officer, or emergency medical responder who lives in a “revitalization area.”

    Go to the Good Neighbor Next Door website to search for homes in your area. Homes are listed for seven days, and you can purchase one for 50% off the listed price.

    The Native American Direct Loan is for Native American military veterans, and it’s issued through the VA. You don’t need money for a down payment, and you won’t pay private mortgage insurance.

    Mortgage and Refinance Rates by State

    Check the latest rates in your state at the links below. 

    Alabama
    Alaska
    Arizona
    Arkansas
    California
    Colorado
    Connecticut
    Delaware
    Florida
    Georgia
    Hawaii
    Idaho
    Illinois
    Indiana
    Iowa
    Kansas
    Kentucky
    Louisiana
    Maine
    Maryland
    Massachusetts
    Michigan
    Minnesota
    Mississippi
    Missouri
    Montana
    Nebraska
    Nevada
    New Hampshire
    New Jersey
    New Mexico
    New York
    North Carolina
    North Dakota
    Ohio
    Oklahoma
    Oregon
    Pennsylvania
    Rhode Island
    South Carolina
    South Dakota
    Tennessee
    Texas
    Utah
    Vermont
    Virginia
    Washington
    Washington DC
    West Virginia
    Wisconsin
    Wyoming

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