Best of

5 Tips for Finding the Best Mortgage Lenders for First-Time Buyers

Beth BuczynskiJuly 2, 2019

At NerdWallet, we strive to help you make financial decisions with confidence. To do this, many or all of the products featured here are from our partners. However, this doesn’t influence our evaluations. Our opinions are our own.

The best mortgage lenders for first-time home buyers embrace FHA, VA and USDA loans, and have low minimum down payments. Here are tips to find the best lender.

Quicken Loans

at Quicken Loans

Min. Credit Score

620

Min. Down Payment

3%

Pros

  • Quicken Loans couples a fully online application with available mortgage advisors for those who want a human touch.
  • Instantly verifies employment and income for more than 60% of working Americans.
  • Offers custom fixed-rate loan terms that are between eight and 30 years.
  • Provides FHA-backed loans, USDA loans as well as products offered by Freddie Mac and Fannie Mae that require down payments as low as 3%.

Cons

  • Doesn't offer home equity loans or HELOCs.
  • If you’re a “look me in the eye” type of customer, you’re out of luck.
  • Doesn’t consider alternative credit data. It just looks at credit scores and debt-to-income ratios, the way most mortgage lenders always have.
Read full review
Min. Credit Score

620

Min. Down Payment

3%

Pros

  • Embraces FHA-backed home loans.
  • Offers several types of construction and renovation mortgages.
  • A professional loan package is tailored for the needs of doctors, lawyers, nurse practitioners, airline pilots and certified public accountants.
  • Flagstar reps are familiar with low-down-payment state bond programs for first-time home buyers and income-limited households, as well as the areas that qualify for USDA loans.
  • Offers home equity loans and home equity lines of credit.

Cons

  • Charges an average $1,295 in underwriting and processing fees.
Read full review
Min. Credit Score

620

Min. Down Payment

3%

Pros

  • Uses manual underwriting to evaluate creditworthiness.
  • Offers full online mortgage application, rate quotes, document upload and loan tracking.
  • Home equity lending sets it apart from most non-bank lenders.

Cons

  • Services not available in all 50 states.
Read full review
Min. Credit Score

620

Min. Down Payment

3%

Pros

  • A wide variety of loan types.
  • Low credit score requirements for government-backed loans.
  • A wealth of educational material on its website.
  • Licensed in all 50 states.

Cons

  • Mortgage application can't be tracked online.
  • Charges origination fees on some loans.
  • Limited branch locations.
Read full review
National / Regional

National

Min. Down Payment

3%

Pros

  • Low down payment options.
  • Discounts for Citibank customers.
  • Looks at alternative credit data like rent history and child support payments.
  • Available in all 50 states.

Cons

  • Charges a mortgage application fee.
  • Did not disclose origination fees, which may vary.
  • Can't complete loan online.
Read full review
Min. Credit Score

620

Min. Down Payment

3%

Pros

  • Allows borrowers to apply entirely online.
  • Offers down payment and closing cost assistance programs.
  • Accepts alternative credit data for some loan types.
  • May give existing customers a discount on mortgage lender origination fees.

Cons

  • Charges an application fee of $1,170, on average.
  • Has a high volume of consumer complaints, even for a big national bank.
Read full review

How to look for a first-time home buyer mortgage lender

The best mortgage lenders for first-time home buyers embrace government loans, offer low down payment options, charge reasonable fees, and help you find financial assistance programs. Here are five tips to help you choose a mortgage lender when buying your first home.

1. Know your credit score and history.

Getting a first-time home buyer mortgage is like applying for college: Only those with the right combination of grades and experience are accepted. But instead of GPA and extracurricular activities, lenders look at your credit score and financial history, and both can affect your mortgage rate in a big way.

Review your credit score and report to learn more about the details lenders judge you on, like debt-to-income ratio, a big factor in deciding how much they’ll let you borrow. Keep in mind the amount you’re allowed to borrow may be different than what you can comfortably afford each month. Use NerdWallet’s home affordability calculator to zero in on a realistic number.

Don’t worry if aspects of your credit are less than stellar: With time and determination, credit problems are fixable. And healthy credit gives you more lenders and affordable loan options to choose from.

2. Ask about first-time home buyer programs.

Some lenders partner with state agencies to offer rate discounts, down payment assistance or educational resources to help first-time home buyers purchase a home. These programs include affordable loan and grant options for public servants, veterans or those with student loans, and benefits can often be combined to make buying your first home as affordable as possible.

Although state housing and finance agencies market these first-time home buyer programs, the mortgages are handled by typical banks, credit unions and non-bank lenders. Eligibility requirements vary by state, program, property location and lender — and not all lenders participate, so be sure to ask.

3. Seek lenders who offer government-backed home loans.

State agencies aren’t the only places to find first-time home buyer mortgages, of course. Loans offered by the U.S. Department of Agriculture, U.S. Department of Veterans Affairs and the Federal Housing Administration have relaxed income, credit and down payment requirements for easier qualification.

USDA and VA loans can often be obtained with zero down payment, while FHA loans require as little as 3.5%, and minimum credit scores for all three are generally lower than for conventional loans. There are limits to how much you can borrow with a government-backed loan, and mortgage insurance — protection for the lender if you default — may be tacked on to your monthly payment.

Not all lenders offer FHA, VA and USDA home loans or their options may be limited, so always ask about availability when comparison shopping.

» MORE: 5 tips for finding the best mortgage lender

4. Compare interest rates and more.

To see current interest rates from different lenders, use our rate comparison tool. But don’t stop there.

Comparing annual percentage rates, or APRs, provides a more complete picture of what you’ll pay over the life of the loan. You’ll also want to compare application, appraisal, title and loan origination fees, which affect closing costs and vary widely depending on the lender.

And when loan officers rattle off these numbers and terms at an alarming rate, don’t just smile and nod. With mortgages, the devil is in the details — pages and pages of them.

Ensure you have all the facts by asking for clarification every step of the way. You should never feel rushed into choosing a loan that doesn’t match your needs or budget.

» MORE: How APR affects your mortgage

5. Get preapproved before house shopping

Preapproval proves a lender is willing to loan you a certain amount of money and signals to home sellers that they can rely on your offer if they accept it. It also provides an idea of what your mortgage payment and interest rate will be if you borrow that amount.

When shopping for lenders, compare preapproval options. Some lenders allow you to upload digital documents and can provide approval online in minutes, while others may require a phone call or visit to a local branch office to deliver documents in person. As you compare lenders, consider their preapproval methods and whether one fits your schedule and documentation preferences better than another.

And if you’re facing preapproval barriers, like a lower credit score or inconsistent income, ask lenders before applying if they’re willing to work around them. Some lenders will help you find errors on your application or take into account nontraditional credit data like rent payments.

» MORE: Get a mortgage preapproval

More from NerdWallet

Last updated on July 2, 2019

Methodology

NerdWallet's selection of mortgage lenders for inclusion here was made based on our evaluation of the products and services that lenders offer to consumers who are actively shopping for the best mortgage. The six key areas we evaluated include the loan types and loan products offered, online capabilities, online mortgage rate information, customer service and the number of complaints filed with the Consumer Financial Protection Bureau as a percentage of loans issued. We also awarded lenders up to one bonus star for a unique program or borrower focus that set them apart from other lenders. To ensure consistency, our ratings are reviewed by multiple people on the NerdWallet Mortgages team.

To recap our selections...

NerdWallet's 5 Tips for Finding the Best Mortgage Lenders for First-Time Buyers

  • Quicken Loans: Best for mortgage lenders for first-time home buyers looking at FHA loans
  • Flagstar: Best for mortgage lenders for first-time home buyers looking at FHA loans
  • New American Funding: Best for mortgage lenders for first-time home buyers with lower credit scores
  • HomeBridge: Best for mortgage lenders for first-time home buyers with lower credit scores
  • Citibank Mortgage: Best for mortgage lenders for first-time home buyers who want in-person service
  • Bank of America: Best for mortgage lenders for first-time home buyers who want in-person service