Buying a home is one of the most important purchases you make in your life. However, making a move from renter to owner can be as overwhelming as it is exciting. The plethora of mortgage options out there can make a home shopping process even more complicated for those looking to find the best mortgage lenders for first-time buyers.
Researching and understanding the home-buying process can prevent many headaches down the road. Answering questions like: “Where do I start?”, “How do I get pre-approved?” and “How do I choose the best mortgage lenders and get the best mortgage rates?” will make this process manageable and enjoyable. It’s best to take your time and ensure you have all of your questions answered before proceeding.
How do you decide what’s best? To make this process easier for you, we’ve created a list of the best mortgage lenders for first-time buyers. You can compare mortgage rates to determine which one best suits your needs. Let’s get started.
Best Overall Mortgage Lender: Quicken Loans
This may come as a surprise to many, but, Quicken Loans is the largest mortgage lender in the United States with an array of mortgage loan options. Quicken Loans was started in 1985 by four friends. In 2000, they moved from brick-and-mortar to strictly online. Today, Quicken Loans is one of the best mortgage lenders, and if you prefer a personal touch, they do offer mortgage officers for borrowers.
In 2016, Quicken Loans introduced the Rocket Mortgage, a user-friendly online mortgage application process that revolutionized the industry. The rocket in the name refers to the time needed for a rocket to reach space, which is approximately 8-½ minutes. Imagine getting your mortgage approved in under 9 minutes; this is a real innovation in the mortgage industry and overall application process.
Quicken Loans is the best-known nationwide lender and a leader in loan technology for a reason. They offer an easy online application process, unrivaled customer service with realtime chat, mortgage officers to speak with, and competitive mortgage rates. On the downside, Quicken Loans offer does not include home equity line of credit (HELOC) or home equity loans.
Some mortgage products include home loans with adjustable and fixed rates, Federal Housing Administration loans, Veteran Affairs loans, Jumbo loans, and more. Visit the Quicken Loans website to check their current mortgage rates and terms.
Adjustable-Rate Mortgage
An adjustable-rate mortgage is an excellent option for buyers who are looking for a low-interest rate in the early years.
Quicken Loans offers borrowers an opportunity to choose the term that suits them best, ranging from 8 to 29 years. This way, homebuyers have greater control over budgeting and long-term financial goals. Choosing a shorter term will save a homeowner interest money by paying off the loan quicker.
30-Year Fixed-Rate Mortgage
The 30-year fixed mortgage is Quicken Loans’ most popular mortgage, giving you 30 years to pay off your mortgage. The monthly payment is low and fixed, which provides borrowers with a sense of stability.
15-Year Fixed-Rate Mortgage
A 15-year fixed-rate mortgage is an ideal option if you’re looking for a fixed rate and want to pay less interest. However, this option comes with a higher monthly payment in comparison to a 30-year fixed mortgage. The upside is that you’ll pay off your mortgage faster.
Federal Housing Administration (FHA) Loans
Borrowers with a lower credit score or those who have experienced financial difficulties may qualify for a Quicken Loans’ FHA loan. First-time homebuyers looking for low down payments (3.5%) and favorable term loans should opt for this type of loan. If you already have an FHA loan, you can get a lower interest rate if you refinance with an FHA Streamline.
Veteran Affair (VA) Loans
Backed by the Department of Veterans Affairs, VA loans are available to qualified veterans who are looking for low rates and no down payment. Eligibility for a VA loan is based on your credit score, which must be a minimum of 620 and have a debt-to-income ratio that’s a maximum of 60%.
Jumbo Loans
Borrowers who need to buy a property between $484,351 and $3,000,000 can save money on interest if they qualify for a jumbo loan. These loans offer flexibility regarding different terms and interest rates that can be fixed or adjustable.
Reverse Mortgage
Homeowners who are 62 and older can cash out on their equity without making loan payments with a reverse mortgage.
Real Estate Agents
If you need a top-notch real estate agent to help you with the homebuying process in any state, Quicken Loans can help you with that. Its sister company, Rocket Homes, partners with trustworthy agents that have a real estate broker license. However, it is recommended that you receive a pre-approval letter first so that your real estate agent can show you homes within your budget.
Best Mortgages for First-Time Buyers: Bank of America
As one of the largest banks in the world, Bank of America offers affordable home loan solutions to its customers. First-time homebuyers who want to secure the right mortgage and who prefer face-to-face interaction with a loan officer should choose Bank of America as their lender. In addition to visiting a brick-and-mortar branch, you can apply for a loan online.
This traditional financial institution offers a variety of mortgage loans, refinance loans, HELOCs, as well as home equity loans. Fixed-rate loan options include 30-year, 20-year, and 15-year terms. Adjustable-rate mortgages (ARM) include 10/1, 7/1, and 5/1. The 5, 7, and 10 refer to the number of years in the mortgage, and the one means that the interest rate is subject to adjustment once per year.
Other types of mortgages include:
- Jumbo loans (up to $5 million),
- FHA loans (low down payment, and loans with fixed-rate available),
- VA loans (flexible eligibility requirements and no down payment),
- Affordable Loan Solution® mortgage (down payment of 3% for lower-income buyers, and no private mortgage insurance).
Unlike its many competitors, Bank of America accepts alternative credit report data such as utility bills and rent receipts and rewards its loyal customers by giving discounts on origination fees.
Qualifying Criteria
If you have a minimum credit score of 620 and your maximum debt-to-income ratio is 43%, you can qualify for a loan with Bank of America. For FHA loans, you need to have a credit score of at least 600.
The Downsides
While there are many benefits to choosing the Bank of America as your lender, there are a couple of significant downsides to consider. First, this lender has many negative reviews and customer service complaints. Second, it has a high application fee of $1,170 at the time of this writing.
Best for VA Loans: Veterans United Home Loans
Veterans United Home Loans operates as a full-service VA mortgage loan lender. That is one of the reasons why it is a leading lender for VA loans in the U.S.
Founded in 2002, the company has offices in 17 states, but offers loan products to veterans and qualifying military families across all 50 states. It is also well-known for its excellent customer service and knowledgeable representatives. The Veterans United Home Loans has an A rating with the Better Business Bureau (BBB) and has only had 39 customer complaints since 2004 when it was BBB accredited, which is astounding.
In addition to VA loans, Veterans United offers FHA, USDA, conventional loans, and jumbo loans (up to $1.5 million). On the other hand, home equity loans and HELOCs are not available. The minimum FICO credit score required is 620.
Fees and Mortgage Rates
The fees vary depending on the borrower’s credit score, loan term, debt-to-income ratio, market conditions, and other factors. VA loans for military homebuyers charge a fee of 1.25% to 3.30% of the purchase price. Origination fees, process fees, and additional charges go up to 1% of the mortgage loan amount.
Mortgages are backed by the federal government (the U.S. Department of Veterans Affairs), which means that homebuyers usually get competitive interest rates. Also, no down payment is required, in contrast to a conventional mortgage that generally requires a minimum down payment ranging anywhere from 3% to 5% of the price. However, since Veterans United Home Loans do not display current interest rates on their website, these rates are, for example, purposes only.
Other Veterans United Home Loan Benefits
- Veterans United Lighthouse Program – If you have a low credit score, you can participate in this credit counseling and repair program. This will help you build your credit and get a mortgage pre-approval.
- Military Advisors – The company works with advisers from each branch of the armed forces.
- Veterans United Realty – The company’s independent affiliate partner offers a nationwide network of real estate agents and is dedicated to helping first-time buyers and current homeowners.
Top FHA Lender and Best for Refinancing: LoanDepot
LoanDepot is an online, non-bank mortgage lender established in 2010. This mortgage company has outstanding customer service and an A rating with the Better Business Bureau. Its mortgage products include conventional mortgage, government-insured FHA and VA, jumbo loans (up to $2 million), and other options.
Refinancing with LoanDepot is simple and straightforward. With $70 billion mortgages refinanced, the company has become the best lender for homebuyers to consider for refinancing. After your first refinance, you won’t pay appraisal fees or refinance fees for all future refinances.
Also, if you’re looking for an FHA loan to purchase your first home, there is no better place to start. If you have a less-than-perfect credit (minimum of 580) and you want a low down payment, you will easily qualify for an FHA government-backed loan. With a maximum loan-to-value ratio of 96.5 percent, you pay a 3.5% down payment. Borrowers who already have an FHA can refinance with an FHA streamline and FHA cash out.
According to their website, LoanDepot origination fees are between 1% and 5%, depending on your credit.
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Additional LoanDepot Advantages
- LoanDepot has 150 branches across the U.S. for homebuyers who prefer banking in person.
- Lending officers can conduct digital verification of your income, assets, credit, and employment – saving you time and money.
- “No steering” policy – Loan officers are not incentivized to promote one product over another. Borrowers have flexibility when choosing a mortgage loan that fits their needs and financial situation.
Best for First-Time Homebuyers with Poor Credit: SoFi
SoFi, or Social Finance, is a former student loan refinancing company that has grown into one of the most renowned online lenders, headquartered in San Francisco.
SoFi is not a traditional lender. It has unique qualification criteria and different underwriting standards, which sets it apart from the competition and makes it a leader in the online mortgage lending industry. In addition to offering an online-only digital platform, SoFi does not require PMI (private mortgage insurance) for jumbo loans. If you have a high income but have little saved up for a 10% down payment, you may still qualify for a jumbo loan up to $3 million.
SoFi also considers borrowers with a limited credit history or a high debt-to-income ratio. That is perfect for young people with substantial student loan debt who stand no chance with standard mortgage lenders. In addition to a credit score, it analyzes income, payment history, professional history, and career prospects.
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Mortgage Products
SoFi offers mortgages with fixed and adjustable interest rates, with APRs starting at 3.274%. Fixed-rate mortgages include 15-year and 30-year loans, while adjustable-rate loan options include 7/1 ARM and 5/1 ARM interest-only mortgages. It also offers jumbo loans and refinancing loans (cash-out and student loan payoff). On the downside, homebuyers looking for FHA, VA, or USDA loans will have to go elsewhere.
As far as fees are concerned, there are no application or origination fees with SoFi. Also, you don’t have to worry if you pay off your mortgage loan early; there’s no prepayment penalty.
Best Mortgage for People With a Low Income: Citibank Mortgage
Citibank Mortgage is a perfect solution for first-time homebuyers who have a low income because it provides flexible lending standards.
Even if you do not have savings for a down payment or traditional work history, you can still qualify for a mortgage. If your FICO credit score is 620 or below, you may be eligible for a Citibank FHA mortgage. Also, both current and new customers can get up to 0.5% off their interest rate on deposit accounts.
Citibank originates loans in all 50 states and offers a variety of mortgage options. In addition to fixed-rate mortgages (of 10, 15, 20, and 30 years), and mortgages with adjustable rates (3/1, 5/1, 7/1 and 10/1), it also offers FHA loans, U.S. Department of Veterans Affairs loans, jumbo loans, home equity, and refinancing options.
Citibank requires that your debt-to-income (DTI) ratio be no higher than 43%. Calculate your DTI by totaling your credit card, auto loan, student loan payments, and other debt, and divide it by your pre-tax monthly income, then, multiply by 100 – this number is your DTI.
Also, sometimes you can negotiate a better rate for non-conforming loans with Citibank. A mortgage broker can help you with negotiation.
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The HomeRun Program
The HomeRun program is designed for low or moderate-income borrowers. If you earn 80% or less than the area median income, you are eligible for this specialized loan product. With competitive interest rates, a down payment of 3%, and no mortgage insurance requirement, the HomeRun program is a significant lending option for lower-income first-time homebuyers. To qualify for the program’s fixed-rate mortgage, you need to take part in counseling courses and homeownership education designed for younger, first-time homebuyers.
Online Experience
You can apply and get preapproved for a mortgage loan with Citibank online. Before completing the application, you have to speak with a loan officer, after which you pay an application fee. The loan closing is in person.
Downsides
The website is simple, and it offers limited information. You can get current mortgage rates, but for details on all rates, you need to register and provide personal information. While the bank has online banking, it does not apply to the mortgage division. There is also no live chat option. Therefore, you should contact a mortgage representative via phone or apply in-person.
Best Traditional Lender: Chase Bank
Best known as America’s largest credit card issuer, Chase is also one of the top mortgage lenders. It offers traditional banking and lending, a large number of physical branches, and a wide array of mortgage products. With over 5,300 offices, face-to-face borrowing experience is something first-time homebuyers and other customers can count on with this bank.
Chase Mortgage Products
Chase offers government-sponsored FHA and VA loans, fixed-rate mortgage, variable-rate mortgage, HELOCs, and jumbo loans. Also, the DreaMaker® mortgage is available to borrowers with low income. While Chase isn’t explicit about a minimum credit score needed to qualify for a mortgage, it is about 620 or higher.
Fixed-rate loans from Chase come with 10-, 15-, 20-, 25- and 30-year terms. An adjustable-rate mortgage is available with terms of five, seven, and ten years. With jumbo loans, you can get up to $3 million, but you pay a higher interest rate. Federal Housing Administration and VA loans are both available in fixed terms of 10, 15, 20, 25, and 30 years. An FHA loan has a down payment of 3.5%.
DreaMaker® Mortgage is designed for borrowers with limited income. It is a fixed-rate loan with a 30-year term, and it allows down payments as low as 3%, which can come from a grant or gift. DreaMaker® has a lower monthly payment and mortgage insurance requirements.
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Online Prequalification
Chase’s website is user-friendly and easy to navigate. You input required details for an online prequalification, which means that you can check whether if you qualify for a mortgage loan online. Moreover, the bank offers online and mobile apps that you can use to monitor loans, checking and savings accounts, and other financial services.
Best for Excellent Customer Service: New American Funding
New American Funding is a family-owned company and one of the nation’s leading mortgage lenders with exceptional customer service. Its A+ rating with the Better Business Bureau is challenging to match. On top of this, it has bilingual loan agents who are ready to provide needed assistance to Spanish speakers.
With the headquarters in California, New American Funding operates in 48 states and has 130 branches nationwide, which is an excellent benefit for first-time homebuyers who prefer a face-to-face consultation.
Loan Products
The lender offers plenty of mortgage options available, including:
- Fixed-rate conventional mortgage (30-, 20- and 15-year terms)
- Adjustable-rate mortgage (5-year, 7-year and 10-year lock period)
- VA, FHA, and USDA (government-backed loan options)
- Interest-only mortgages
- Jumbo loans (non-conforming loans with fixed and ARM programs up to $15 Million)
- Home improvement mortgages (FHA 203K Program)
In addition, the New American Funding offer includes home equity loans, HELOCs, and reverse loans for homeowners over the age of 62.
Depending on the mortgage loan, a required credit score varies. For an FHA loan, you will need a minimum credit score of 580, but for most loans, you will need at least 620. A down payment for conventional loans is 3%, while for an FHA mortgage loan is 3.5%.
You cannot find interest rates on the New American Funding website. To get personalized mortgage rates that fit your financial situation, you need to provide the necessary personal details.
Starting the Loan Process
You can start your application online, in person, or via phone. If there isn’t a physical branch near you, you can apply online or via the telephone. You can begin prequalification online, too, but you must contact a loan officer to get a pre-approval letter. Once the pre-approval process is completed, the lender will finalize closing details on your behalf through the real estate agent.
In contrast to its many competitors, New American Funding uses a manual underwriting system when assessing a borrower’s credit eligibility. While an automated system might be faster, a manual underwriting system provides an opportunity for underserved communities to qualify for a mortgage loan.
For struggling first-time homebuyers, New American Funding offers help with a down payment in the form of grants and down payment assistance programs.
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