Mortgage Options for Bay Area First-Time Home Buyers

Bay Area first-time home buyers tend to have a lot of questions about their mortgage financing options. One of the more common questions is: What’s the best type of mortgage loan for a first-time buyer in the Bay Area?

As you will soon see, there is no one type of mortgage loan that’s best for all buyers. The key is to choose the type of home loan that helps you achieve your goals and priorities. So let’s take a look at the different types of home loans that are available to first-time home buyers in the Bay Area.

Mortgage Choices for Bay Area First-Time Buyers

As a borrower, you have several important choices to make when it comes to your mortgage financing options. Your first choice is whether you want to use a conventional loan or one that is backed by the government. They both have their pros and cons.

• A conventional mortgage loan is one that is not guaranteed or insured by the federal government.
• A government backed loan, such as the FHA and VA programs, do receive some kind of government insurance or guarantee.

If your credit history is a bit shaky, you might be better off using one of the government-backed mortgage programs. The qualification criteria are generally easier for these programs, since they receive some kind of federal insurance or guarantee.

On the other hand, borrowers with excellent credit and substantial funds for a down payment might be better off with a conventional loan. By using a conventional home loan to buy your first house in the Bay Area, you could avoid the added cost of private mortgage insurance (PMI).

Another important choice for Bay Area first-time buyers has to do with the mortgage rate assigned to the loan. As a borrower, you can choose between a fixed or adjustable rate structure.

The fixed-rate mortgage loan is by far the most popular financing option among first-time buyers in the Bay Area. True to its name, it keeps the same interest rate for the entire life or term of the loan. This can be a good option for first-time home buyers who prefer long-term predictability and stability.

An adjustable mortgage loan, on the other hand, has an interest rate that can change over time. The rate usually stays the same for the first few years, after which it will begin to adjust annually. The benefit of using an adjustable mortgage is that they usually offer a lower initial interest rate, when compared to fixed mortgage.

What Are Your Financing Goals?

One of the best things you can do as a first-time home buyer is to think about your long-term financing goals and priorities.

What’s the most important thing for you, in terms of your housing costs? Are you mostly concerned with minimizing your monthly payments? Or are you more concerned with reducing the total amount of interest paid over time? These considerations can help you determine which loan might be best for you.

The amount of money you’ve saved for a down payment is another important factor when choosing a mortgage loan. Bay Area first-time home buyers with limited funds in the bank typically lean toward mortgage loans that offer a lower down payment. A down payment of 20% or more has its advantages, but not everyone can afford to put that much money down.

There are some low down payment mortgage options for first-time home buyers in the Bay Area. Some conventional loans offer a down payment as low as 3%, while the FHA program allows borrowers to put down as little as 3.5%.

Bay Area first-time buyers can also benefit from using gift money to cover their down payments. This is when an approved third-party donor provides funds to help you cover your upfront housing expenses, such as the down payment and closing costs.

Are You a Military Member or Veteran?

Bay Area first-time home buyers with military service have an added advantage when it comes to choosing a mortgage loan. Most military members and veterans in California are eligible for the VA loan program.

This is one of the best mortgage options for a first-time buyer, and for several reasons. For one thing, this program allows you to finance 100% of your home purchase. That means you can buy a house in the Bay Area without putting any money down.

The VA loan program also allows first-time buyers to avoid the added cost of mortgage insurance, which we talked about earlier. With a regular or conventional loan, borrowers who put little money down typically have to pay for mortgage insurance. But that’s not the case with the VA loan program.

Summary and Next Steps

As you can see, there are many different mortgage options available for first-time home buyers in the Bay Area. As a borrower, you have a lot of choices to make. The first step is to think about your budget and your financing goals. Next, you would want to choose a mortgage option that helps you accomplish those goals.

For nearly 20 years, Bridgepoint Funding has been helping first-time home buyers across the Bay Area. We offer a variety of home loan products and programs, including all of the options discussed in this article. Please contact us if you have questions about qualifying for a mortgage loan, or if you would like to start the application process.