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By
Kim Porter
Kim Porter
Contributor
Kim is a freelance contributor to Newsweek’s personal finance team. She began her career on the Bankrate copy desk in 2010, worked as a managing editor at Macmillan and went full-time freelance in 2018. Since then, she’s written for dozens of publications including U.S. News & World Report, USA Today, Credit Karma, AARP The Magazine and more. She loves spending her free time reading, running, baking and hanging out with her family.
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Reviewed By
Robert Thorpe
Robert Thorpe
Senior Editor
Robert is a senior editor at Newsweek, specializing in a range of personal finance topics, including credit cards, loans and banking. Prior to Newsweek, he worked at Bankrate as the lead editor for small business loans and as a credit cards writer and editor. He has also written and edited for CreditCards.com, The Points Guy and The Motley Fool Ascent.
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First-time homebuyers make up about a third of all homebuyers, according to data from the National Association of Realtors. While these buyers are eager to own a home of their own, according to NAR’s report, they may struggle with some of the costs involved and home loan eligibility requirements. First-time buyers make smaller down payments, with an average of 8%, and often have lower credit scores compared to repeat buyers.
Fortunately, first-time homebuyer loans make it easier to get into a home and afford the upfront costs. We’ll go through some of the best mortgage lenders for first-time homebuyers and how to choose the best option for your situation.
Our Methodology
Our research is designed to provide you with a comprehensive understanding of personal finance services and products that best suit your needs. To help you in the decision-making process, our expert contributors compare common preferences and potential pain points, such as affordability, accessibility, and credibility.
Our Picks
- Best Relationship Discount: Wells Fargo
- Best Customer Service: Fairway Independent Mortgage Corp.
- Best for Small Down Payments: Rocket Mortgage
- Best National Bank: Chase Bank
- Best for Low-Income Borrowers: PNC Bank
- Best for Low Credit Score: Guild Mortgage
- Best for Military Members: Veterans United Home Loans
- Best for No Fees: Ally
- Best for No PMI: Citi Mortgage
- Best for Earning Rewards: SoFi
Best Mortgage Lenders for First-Time Homebuyers of 2024
Best Relationship Discount
Wells Fargo
Vault Verified
Minimum Credit Score
620
Days to Close
30 to 90 days
Minimum Down Payment
3% (conventional)
Terms Offered
Fixed rate: 15 or 30 years
Adjustable rate: 7/6
Why We Chose It
Wells Fargo customers getting a jumbo loan may qualify for a relationship discount of up to 1 percentage point off their mortgage rate. This is a feature that can potentially save you tens of thousands of dollars over the life of the loan. There are also programs available for lower-income borrowers with nontraditional credit histories. The Wells Fargo’s Dream. Plan. Home. mortgage, for instance, offers a down payment as low as 3%, and borrowers may also qualify for a grant of up to $5,000 toward one-time closing costs and a $10,000 down payment grant in select locations.
Pros
- Provides a low-down-payment mortgage option for borrowers with nontraditional credit
- Offers relationship discounts
- Provides a closing cost grant and down payment assistance that doesn’t have to be repaid for eligible buyers
Cons
- Doesn’t display rates on its website
- Relatively long closing time frame
- Relationship discount comes with strict qualifications
Best Customer Service
Fairway Independent Mortgage Corp.
Vault Verified
Minimum Credit Score
620
Days to Close
30 days
Minimum Down Payment
3% (conventional)
Terms Offered
Fixed: 10, 15, 20, 25 or 30 years
Adjustable: 5/1, 7/1 or 10/1
Why We Chose It
Fairway Independent Mortgage Corp. took the No. 1 spot in J.D. Power’s 2023 U.S. Mortgage Origination Satisfaction Study—an honor previously held by Rocket Mortgage for more than a decade. Fairway offers all of the major home loan programs plus a few options that are harder to find elsewhere, such as a mortgage designed for physicians. The lender also allows borrowers to use state-sponsored down payment assistance programs, which is helpful for first-time homebuyers who don’t have the funds to cover a down payment.
Pros
- Wide range of home loan options
- Top-rated customer service
- Allows down payment assistance
Cons
- Doesn’t display interest rates on its website
- Doesn’t disclose lender fees on its website
- Doesn’t offer home equity loans or HELOCs
Best for Small Down Payments
Rocket Mortgage
Vault Verified
Minimum Credit Score
580
Days to Close
34 days
Minimum Down Payment
1% (conventional)
Terms Offered
8 to 30 years
Why We Chose It
When taking out a conventional home loan, first-time homebuyers usually need to put down at least 3%. But Rocket Mortgage’s ONE+ program allows you to put down just 1% of the home’s purchase price, and Rocket then covers 2% as a grant that doesn’t have to be repaid. This feature can be incredibly helpful to first-time homebuyers who haven’t had much time to save for a down payment. Rocket also offers a closing credit of up to $10,000 when you get a home loan with the lender and use the company’s real estate services. You’ll also be in good hands throughout the process, as the lender consistently receives top marks for customer satisfaction in J.D. Power studies and third-party review sites.
Pros
- Can put down as little as 1% on a conventional home loan
- May qualify for a $10,000 closing credit
- Top-rated customer service
Cons
- Getting a customized interest rate quote requires a hard credit check
- Doesn’t offer HELOCs (but does offer home equity loans)
- No in-person branches
Best On-Time Closing Guarantee
Chase Bank
Vault Verified
Minimum Credit Score
620
Days to Close
21 days
Minimum Down Payment
3% (conventional)
Terms Offered
Fixed: 10, 15, 20, 25 and 30 years
Adjustable: 10/6, 7/6 and 5/6
Why We Chose It
Chase Bank provides an on-time closing guarantee for eligible home loans through July 27, 2024. If the bank doesn’t close your loan within three weeks, you get an eye-popping $20,000 for eligible products. (The guarantee amount returns to the standard $5,000 after that date.) On top of the closing guarantee, homebuyers can receive up to $7,500 to use toward select upfront costs when they qualify based on location and income.
Pros
- On-time closing guarantee pays out $20,000 if your closing is late
- Grants for customers of up to $7,500 through the Chase Homebuyer Grant℠ program
- Highly rated customer service
Cons
- Prequalification is required before submitting a full online application
- Relatively high origination fees
Best for Low-Income Borrowers
PNC Bank
Vault Verified
Minimum Credit Score
620
Days to Close
7 to 10
Minimum Down Payment
3% (conventional)
Terms Offered
10, 15, 20 and 30 years
Why We Chose It
With PNC Bank, you may qualify for up to $5,000 in closing cost assistance if you meet income and location requirements. The funds can be used to reduce or eliminate your closing costs, cover certain prepaid costs or reduce your down payment. PNC Bank states these loans are a good fit for people with lower credit scores and can only afford a low or minimal down payment.
Pros
- Very quick closing timeline
- Closing cost assistance grant of up to $5,000
- Several repayment terms to choose from
Cons
- Below-average customer satisfaction scores
- Branches not available in all states
- Will need to speak with a loan officer to submit a mortgage application
Best for Nontraditional Credit
Guild Mortgage
Vault Verified
Minimum Credit Score
540
Days to Close
30 to 45 days
Minimum Down Payment
3% (conventional)
Terms Offered
Fixed: 10, 15, 20 or 30 years
Adjustable: 5/6, 7/6 and 10/6
Why We Chose It
Guild Mortgage is one of the best mortgage lenders for bad credit. For borrowers with no credit history and no credit score, Guild offers nontraditional credit underwriting for FHA, VA, USDA and conventional financing. And if you do have a credit history, Guild says you may qualify with a credit score starting at 540 for some of its loans.
Pros
- Offers loans to borrowers with no credit history
- Accepts low credit scores on some of its loans
- Has in-person branches
Cons
- Below-average customer satisfaction score
- Doesn’t publish mortgage rates on website
- No in-house closing cost assistance programs
Best for Military Members
Veterans United Home Loans
Vault Verified
Minimum Credit Score
600
Days to Close
Undisclosed
Minimum Down Payment
0%
Terms Offered
15, 20 or 30 years
Why We Chose It
Veterans United earned the highest score in J.D. Power’s 2023 U.S. Mortgage Origination Satisfaction Study (though it doesn’t meet criteria to be ranked) and is consistently one of the top originators of VA loans by volume. The combination of experience, VA loan menu and strong reputation makes this lender your best bet if you’re looking to take out a VA loan. First-time homebuyers can also get 24/7 help with any questions by phone.
Pros
- Specializes in VA loans
- Representatives available 24/7 to answer questions
- Publishes sample mortgage rates on its website
Cons
- Not a good fit if you haven’t served in the military
- Branch locations in just 17 states
- Doesn’t offer home equity loans and HELOCs
Best for No Fees
Ally
Vault Verified
Minimum Credit Score
620
Days to Close
33 days
Minimum Down Payment
3% (conventional)
Terms Offered
Fixed: 15, 20 or 30 years
Adjustable: 5/6, 7/6 or 10/6
Why We Chose It
Ally doesn’t charge lender fees, which can help keep your upfront costs low when buying a home for the first time. Plus, eligible Ally customers also receive $500 toward closing costs. And through the Ally Homebuyer Grant program, first-time homebuyers in Charlotte, Detroit and Philadelphia may qualify for $5,000 in down payment assistance.
Pros
- Doesn’t charge lender fees
- Publishes sample mortgage rates on its website
- Down payment and/or closing cost assistance available
Cons
- Ally Homebuyer Grant only available in Charlotte, Detroit and Philadelphia
- Doesn’t offer FHA, VA or USDA loans
- Doesn’t offer home equity loans or HELOCs
Best for No PMI
Citi Mortgage
Vault Verified
Minimum Credit Score
Available to borrowers with no credit score and limited credit
Days to Close
30 days
Minimum Down Payment
3% (conventional)
Terms Offered
Fixed: 10, 15, 20 or 30 years
Adjustable: 3/6, 5/6, 7/6 or 10/6
Why We Chose It
Through Citi Mortgage’s HomeRun program, qualifying borrowers can put down 3% (including up to 2% gift funds) without paying for private mortgage insurance (PMI). This feature alone may save you thousands of dollars over the life of the loan. Eligible borrowers may also receive up to $7,500 as a lender credit toward closing costs.
Pros
- Loan option with 3% down payment and no PMI
- Loan options for borrowers with limited or no traditional credit history
- Lender credit of up to $7,500
- Relationship discount to eligible Citi customers
Cons
- Doesn’t offer USDA loans
- Branch locations only in select states
Best for Earning Rewards
SoFi
Vault Verified
Minimum Credit Score
600
Days to Close
10 to 32 days
Minimum Down Payment
3% (conventional)
Terms Offered
Fixed: 10, 15, 20 and 30 years
Adjustable: 5/1, 5/6, 7/6 and 10/6
Why We Chose It
Because true first-time homebuyers won’t use equity from a previous home sale, any free cash they can get is extra-helpful. With SoFi, you can earn up to $9,500 when you hire a partnering real estate agent. The lender also offers an on-time closing guarantee that pays you $10,000 if it delays your closing date (as long as you meet requirements).
Pros
- Cash reward up to $9,500 when you hire a partnering real estate agent
- On-time closing guarantee pays up to $10,000
- Accepts fair credit scores
Cons
- Doesn’t offer USDA loans
What Is a Mortgage for First-Time Homebuyers?
A mortgage for a first-time homebuyer is a home loan that’s designed for someone who either has never owned a home or meets other criteria. For instance, you may qualify for first-time homebuyer loans if you haven’t owned a home within the past three years or you purchased a home with an ex-spouse.
These mortgages typically come with features that make homeownership more accessible for first-timers. The features vary with each program but may include:
- Low down payments, since the borrower won’t have equity from a previous home to put toward a new one.
- A grant or an affordable loan that can be used toward down payments, closing costs and other expenses you’d typically pay upfront.
- Benefits like educational resources, no private mortgage insurance and job loss protection.
What Type of Loan Is Best for a First-Time Homebuyer?
If you’re a first-time homebuyer, the best home loan for you depends on factors like your financial situation, where you’re buying a home and the size of your down payment. The following types of mortgages are often attractive to first-time homebuyers because they come with affordable features, so you can weigh your options:
- Federal Housing Administration (FHA) loan: With an FHA loan, you may qualify with a minimum down payment of 3.5% and a credit score of 580. If you have a down payment of at least 10%, your credit score can be as low as 500.
- U.S. Department of Agriculture (USDA) loan: If you’re buying a home in a rural area and you meet income requirements, you may qualify for a USDA loan with no down payment.
- Department of Veterans Affairs (VA) loan: VA loans are available to eligible service members, veterans and surviving spouses. The loans come with no down payment, no mortgage insurance, low closing costs and competitive mortgage rates.
- Fannie Mae: First-time homebuyers can also get a conventional home loan with a down payment of 3% through Fannie Mae’s 97% loan-to-value option. You’ll need a credit score of at least 620 to qualify.
- Freddie Mac: First-time homebuyers have a similar option through Freddie Mac’s HomeOne program, where you can put down as little as 3% and must have a credit score of at least 620 to qualify. Freddie and Fannie are government-sponsored enterprises that purchase most U.S.-based home loans on the secondary market.
First-Time Homebuyer Programs
First-time homebuyers have several ways to get help with the costs of buying a home. Here are some to explore:
- Down payment assistance programs: This special financial assistance helps you cover some of the upfront expenses of buying a home, such as the down payment or closing costs. You may qualify for a grant that doesn’t have to be repaid or an affordable loan that’s either forgivable or repayable when you no longer own the home. These programs may be available from lenders, state agencies and employers.
- Lender-offered perks: Some lenders offer special programs for first-time homebuyers, such as mortgages that come with low down payments and no private mortgage insurance.
- Preferential treatment of IRA distributions: You’ll typically owe a tax penalty if you pull money out of your individual retirement account (IRA) before reaching age 59-½. But if you use the money to buy your first home, you can take out up to $10,000 penalty-free.
- Support from nonprofits: Groups like Habitat for Humanity, the Neighborhood Assistance Corporation Of America (NACA) and the National Homebuyers Fund (NHF) have programs to help people buy homes for the first time. Eligibility is usually based on income.
How to Choose the Best Mortgage Lender for You
The best mortgage lenders have a wide variety of loan options and offer low interest rates to help you save money. Here are some factors to consider when searching for a mortgage lender.
Lender Availability
Some lenders offer their services in every state, while others cater to specific regions. You’ll need to look for lenders that can provide home loans in your area. Also consider whether you want the lender to have a local branch where you live or you’re comfortable handling the process online.
Loan Availability
Every lender also has a different menu of home loan options. If you know which type of mortgage program you want to use—such as an FHA loan—then look for lenders that originate those loans. But experience matters too. Lenders that routinely handle FHA loans, for example, will know the ins and outs of the program and can guide you through the process.
And if you’re not sure which type of home loan you want to get, look for a provider that has a wide variety of options and strong customer service. A loan officer can help you choose the best mortgage for you, based on details like your eligibility, where you’re looking to buy a home and the amount you want to spend.
Interest Rates
Your mortgage rate will have a big impact on how much you pay each month, so it’s important to find a lender with competitive rates. A study by the Consumer Financial Protection Bureau found that rates can vary by more than half a percentage point between two lenders when comparing borrowers with the same profile. While that difference might not seem like much, getting the lower rate can help you save thousands of dollars over the life of the loan.
Discounts and Deals
Some lenders offer discounts or host their own closing cost and down payment assistance programs. So you may qualify for big savings or thousands of dollars to put toward your home loan. Either way, you’ll also want to make sure the lender is strong in other areas as well. It should have a reputation for good customer service, several loan options and competitive interest rates.
Borrower Eligibility
Most of the major mortgage programs have minimum eligibility requirements based on your credit score, debt-to-income ratio and down payment. Lenders can also set stricter requirements that you’ll need to meet. If your credit score is on the lower side or your debt-to-income (DTI) ratio is a bit high, you may need to search for lenders with flexible lending criteria. Ask for a pre-qualification that uses a soft credit pull, which allows you to check your offers without affecting your credit.
Frequently Asked Questions
Do I Qualify for a First-Time Homebuyer Loan?
Most first-time homebuyer loan programs base eligibility on income and the location of your new property. If you don’t qualify based on these factors, consider checking out FHA loans, VA loans, USDA loans and Fannie Mae’s first-time homebuyer program. These loans have flexible lending criteria and low down payments, so you may qualify for a mortgage here.
What Credit Score Do You Need to Get a Home Loan?
FHA loans have a minimum credit score of either 500 or 580, depending on your down payment. Lenders set their own credit score requirements for USDA loans and VA loans. And with conforming conventional loans, you’ll need a credit score of at least 620.
Who Is the #1 Mortgage Lender in America?
If you’re looking at lenders that lead in home loan origination volume, the top three in 2023, according to Scotsman Guide, were United Wholesale Mortgage, Pennymac and Caliber Home Loans. The three lenders that lead in customer satisfaction are Fairway Independent Mortgage Corp., Rocket Mortgage and Citi Mortgage, according to the J.D. Power 2023 U.S. Mortgage Origination Satisfaction Study.
Article Sources
At Newsweek Vault, our team of dedicated writers and editors are not just experts in their respective fields but also committed to delivering content that meets the highest standards of journalistic integrity. We analyze primary sources, including peer-reviewed studies, authoritative government sites and insights from leading industry professionals and ensure that every piece of information is researched, fact-checked and presented with accuracy and relevance.
- 2023 Profile of Home Buyers and Sellers. National Association of Realtors. Accessed on April 15, 2024.
- CFPB Report Finds Nearly Half of Borrowers Do Not Shop for a Mortgage. Consumer Financial Protection Bureau. Accessed on April 15, 2024.
- Customer Satisfaction with Mortgage Lenders Rises but Signs Point to Challenges Ahead. J.D. Power Finds. J.D. Power. Accessed on April 15, 2024
- Top Mortgage Lenders. Scotsman Guide. Accessed on April 15, 2024.
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Editorial Note: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, hotel, airline or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post. We may earn a commission from partner links on Newsweek, but commissions do not affect our editors’ opinions or evaluations.
Kim Porter
Contributor
Kim is a freelance contributor to Newsweek’s personal finance team. She began her career on the Bankrate copy desk in 2010, worked as a managing editor at Macmillan and went full-time freelance in 2018. Since then, she’s written for dozens of publications including U.S. News & World Report, USA Today, Credit Karma, AARP The Magazine and more. She loves spending her free time reading, running, baking and hanging out with her family.
Read more articles by Kim Porter
