Buying a house for the first time comes with unique benefits. However, the cost is often intimidating, especially for those who haven’t yet learned their options. There are various methods to making a home more affordable for you and any loved ones. Here’s what you need to qualify for a loan, plus the rundown on five financing choices.

Qualification Requirements

Home loan requirements vary, but lenders generally look at your debt-to-income ratio, creditworthiness and loan-to-value ratio. You must: 

●      Prove you have the financial capacity to repay your debt accordingly.

●      Show you historically pay your bills on time and in full.

●      Shoulder a reasonable portion of the house’s selling price. 

You can still qualify for a mortgage loan even if you have low income or bad credit and are willing to pay a small down payment. Mortgage lending is about trade-offs, so expect compromises when you make yourself a riskier borrower for lenders.

How First-Time Homeowners Can Utilize Financing Options

Buying a house involves saving considerable cash and borrowing the remaining funds necessary to make a purchase is the norm. However, you may not have to strictly follow this formula because of the various available financing options.


If you have hundreds of thousands of dollars lying around, consider buying a house with cash. It allows you to own your residence from the get-go. This option can be disadvantageous if you’re eliminating your savings all in one go, but doing so is more feasible if you have an emergency fund for hospital trips or unexpected bills.

Conventional Mortgages

Conventional mortgages are home loans not insured by the federal government. They can be conforming or nonconforming.

 Conforming mortgages are loans that satisfy the annual dollar limits the Federal Housing Finance Agency sets and the funding criteria Freddie Mac and Fannie Mae impose. Lenders can easily resell these loans to investors on secondary markets and get them off their books. On the contrary, nonconforming or jumbo loans are too expensive for government-sponsored entities to guarantee.

 If you take out a conforming mortgage, you can get a lower interest rate, but your loan size is limited. Conversely, applying for a jumbo loan lets you borrow more cash to buy a bigger house in exchange for a higher interest rate. Moreover, Freddie Mac and Fannie Mae offer Conventional 97 mortgage programs, which require a minimum 3% down payment.

Government-Backed Mortgages

Government-backed mortgages are home loans guaranteed by federal government agencies, including: 

●      Federal Housing Administration (FHA)

●      U.S. Department of Agriculture (USDA)

●      U.S. Department of Veterans Affairs (VA)

 FHA loans have laxer credit requirements, accepting scores as low as 500. USDA mortgage programs provide 100% financing on properties in qualifying rural and suburban areas but have income limits. VA loans exist for veterans, active service members and their surviving spouses, require 0% down, and may give access to more significant loan amounts.

 If you’re Native American, consider HUD Section 184 to own a house easily. It has no minimum credit and low down payment requirements.


Nonprofits and federal, state, and local governments offer closing cost and down payment assistance programs (DPA) exclusively for first-time homebuyers. There are nearly 2,000 DPAs available across the country. Each one defines how to spend the funds, whether you need to repay them and how to avoid paying them. Consider tax deductions through your local or state government and seller concessions to save more money.


Depending on your mortgage program, you could use monetary gifts from specific third parties to help you cover the minimum down payment and closing costs. If you buy your parent’s house, you may use a gift of equity — where the property owner sells it at below-market value — to make your purchase more affordable.

Exploring Financing Options Is Just the Beginning

Buying a house may involve one-time expenses, like a prepayment penalty. Your monthly mortgage payments may also include private mortgage insurance and homeowners insurance premiums on top of the principal, interest, and property taxes. Study all your options to make your finances manageable over the long term.