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

Beth BuczynskiJuly 2, 2019

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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.

When you’re a first-time home buyer, shopping mortgage lenders may feel like a huge chore. But, like buying a car or choosing an insurance policy, taking time to compare your options can save you heartache as well as money.

  1. How to find a lender for your first mortgage Use these tips to find a mortgage lender for first-time home buyers. Read more about each tip here.

  2. Know your credit score and history. Lenders use both to decide your mortgage interest rate and more.

  3. Investigate assistance programs. Some lenders and state housing finance agencies can help with a down payment and closing costs.

  4. Seek out government loans. FHA, VA and USDA loans typically offer more relaxed qualification requirements.

  5. Request quotes from several lenders. Pay special attention to the annual percentage rate, or APR, and any origination fees.

  6. Get preapproved before shopping for houses. A preapproval letter will help you stay on budget and tells sellers you mean business.

NerdWallet researched the nation’s leading mortgage lenders and selected the top ones for first-time buyers. Want even more options? Check out our full list of top mortgage lenders for first-time home buyers.

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at Quicken Loans

Quicken Loans: NMLS#3030

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Min. Credit Score

620

Min. Down Payment

3%

at Quicken Loans


Why we like it

Ideal choice for convenience and quick-response customer service. Quicken Loans provides just about all the services your neighborhood lender does — with online convenience.

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

  • Quicken Loans 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

Flagstar: NMLS#417490

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Min. Credit Score

620

Min. Down Payment

3%


Why we like it

Good for borrowers who want a wide range of choices — not only among mortgage products, but also in the channel they prefer, whether a branch, online or on the phone.

Pros

  • Offers a wide range of loan types and products, including FHA, VA and USDA.

  • Has a full suite of online conveniences.

  • Does well with rate transparency, and monthly payment estimates add mortgage insurance, when applicable.

Cons

  • Doesn’t offer renovation loans at this time.

  • Home equity lending is geographically limited.

Read Full Review
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at New American

New American Funding: NMLS#6606

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Min. Credit Score

700

Min. Down Payment

3%

National / Regional

National

at New American


Why we like it

Ideal for borrowers who need to be evaluated on the basis of nontraditional credit. New American Funding offers FHA and VA loans, works with down payment assistance programs, and helps borrowers whose credit histories don't fit the mold of traditional banking.

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

HomeBridge: NMLS#6521

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Min. Credit Score

620

Min. Down Payment

3%


Why we like it

Good for borrowers who want a loan officer's help, in person or on the phone, when deciding among the wide range of available mortgage options — including loans to buy and renovate.

Pros

  • Offers a full array of mortgage products, including government and renovation loans.

  • Has loans for most purposes, including purchase, refinance and jumbo mortgages.

  • Online portal keeps borrowers up-to-date on the loan application's progress.

Cons

  • Doesn't post interest rates on its site.

  • Doesn’t offer home equity loans or lines of credit.

Read Full Review

Citibank: NMLS#412915

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National / Regional

National

Min. Down Payment

3%


Why we like it

Good for: Borrowers wanting to compare mortgage rates online for a variety of loan options.

Pros

  • Offers a wide variety of loan options, including low-down-payment mortgages and jumbo mortgages.

  • Provides customizable mortgage rates on its website.

  • Offers low rates and fees compared to other lenders.

Cons

  • Charges a mortgage application fee.

  • Requires help from a mortgage loan officer to complete the loan application online.

Read Full Review

Bank of America: NMLS#399802

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Min. Credit Score

620

Min. Down Payment

3%


Why we like it

Ideal for borrowers who prefer a traditional bank. Bank of America offers a wide array of mortgages and online account management tools. It also has first-time home buyer loans with low down payments and no mandatory mortgage insurance.

Pros

  • Allows borrowers to apply entirely online.

  • Offers down payment and closing cost assistance programs.

  • May give existing customers a discount on mortgage lender origination fees.

Cons

  • Does not offer renovation loans.

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.

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.

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 from NerdWallet

Last updated on July 2, 2019

Methodology

NerdWallet's star ratings for mortgage lenders are awarded based on our evaluation of the products and services each lender offers to consumers who are actively shopping for the best mortgage. The five key areas we evaluated include the variety of loan types and products offered, online conveniences, online mortgage rate information, and the rate spread and origination fee lenders reported in the latest available Home Mortgage Disclosure Act data. 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: 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