Home Loans Made Simple: What to Know as a First-Time Home Buyer

Long ago, Ralph Waldo Emerson summed up homeownership: "A house is made with walls and beams; a home is built with love and dreams."

Dreams of homeownership are something many of our members have. What can be less dreamy is navigating the home loan choices. To help you get started, our team has put together an introduction and some great tools to help.

Types of home loans

Over 90% of first-time homeowners in the U.S. used financing to buy their first home, so you're in good company. The type of home loan, though, can vary and it's good to start with a basic understanding of these:

Fixed Rate Mortage

It's all in the name: this home loan has a fixed rate that never changes for the life of the loan. This means you'll always know your monthly payment and it will never go up. These home loans can be slightly more difficult to obtain if you're a first-time buyer.

Adjustable Rate Mortgage

Often referred to as an ARM and a great option for first-time buyers. These have a lower initial rate than a fixed-rate mortgage which translates into a lower monthly payment when you need it most—when you're starting out. You might read about a "5/5 ARM" for example. This means that for the first five years your rate is fixed, meaning your monthly payment remains the same. After five years, the rate can go up or down depending on the market and can adjust every five years for the remaining loan term. An ARM is a good option if you expect to only stay in the home for a short time. Learn more about our 5/5 ARM First-Time Homebuyer Loan here.

Piggyback Loans

This unique loan is actually two loans in one. The majority of your loan is a standard mortgage (a "first mortgage") and the remaining smaller balance is a "second mortgage". This is a great option for first-time buyers as it can mean a lower down payment and you might avoid Primary Mortgage Insurance.

Our "Buying A Home" online course goes into more detail on your mortgage options. You can also review our home loan options and today's rates here.

About Primary Mortgage Insurance

Often referred to as PMI, this is insurance you are required to maintain if you're not putting at least a 20% down payment. We have this great explainer on PMI you'll want to review.

Down payment gifts

As you consider your home loan options, you may be lucky to have family or friends who want to help you with your down payment. One caveat: it's important to document where these funds are coming from and what they are to avoid misrepresenting loans that must be repaid. Read this explainer for details and talk to our mortgage experts for more information.

You got this

We've helped members reach their first-time home buying dreams and we're here to help you too. We have a great team to help answer your questions, give you trusted advice, and cheer you on to reaching your goal of homeownership. Contact them today to help open the door to your new home.