Buying your first home is an exciting milestone, but it can also feel overwhelming. Not only is it likely the biggest purchase of your lifetime; it also impacts your financial future more than you may know.
Homeownership is a critical tool for building long-term wealth and providing financial stability — for both you and future generations. Unfortunately, affordability is a challenge for many. Home prices have surged over the past decade, outpacing wage growth. While St. Louis remains one of the country’s most affordable metro areas, many residents still struggle to enter the housing market.
Midwest BankCentre is dedicated to making homeownership more accessible for all. If you’re exploring homeownership, here’s what you need to know about the types of mortgages for first-time home buyers and how to make your dream home a reality.
Several mortgage options are available to first-time buyers:
- Conventional Loans: Best for buyers with strong credit scores, conventional loans are the most popular mortgage option in the U.S.
- FHA Loans: Backed by the Federal Housing Administration, FHA loans require lower down payments and offer flexible credit requirements. For workers with seasonal or cyclical income fluctuations, FHA loans can be a good option.
- VA Loans: A Veterans Affairs (VA) home loan is a great benefit to veterans, active-duty service members, and eligible surviving spouses. These loans require little to no down payment and no private mortgage insurance (PMI).
- USDA Loans: Designed for buyers in rural areas, these loans can finance both land and homes with low or no down payment requirements.
Be sure to look into special mortgage programs as well. For example, Midwest BankCentre is offering a Mortgage Rate Relief program to make homeownership more affordable for lower- to middle-income families. For a limited time, households with incomes below $82,560 can qualify for a rate that’s 1.5% below current market rate on a 30-year fix-rate mortgage.
Down Payments
A down payment is the percentage of a home’s purchase price that you pay upfront when closing on your home loan. It reduces the amount you need to borrow and can impact your mortgage terms. Different loans have different down payment requirements. Conventional loans typically require 5 – 20%. A 20+% down payment helps avoid private mortgage insurance (PMI). FHA loans require just 3.5%, and VA and USDA loans require little to no down payment at all.
If saving for a down payment is a challenge, assistance programs are available through private lenders, municipal programs, and nonprofit organizations. Midwest BankCentre offers down payment assistance programs to help bridge the gap for qualified buyers. Not all lenders have access to the same programs, so it’s essential to explore your options.
Fixed vs. Adjustable Interest Rates
Another important decision is choosing between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
- Fixed-Rate Mortgages: Lock in your interest rate for the life of the loan, making payments predictable. Many first-time buyers opt for a 30-year fixed-rate mortgage for stability and lower payments.
- Adjustable-Rate Mortgages (ARMs): Start with a lower interest rate that adjusts periodically. While ARMs can be beneficial if you plan to move within a few years, they carry some risk, as rates can rise over time.
Where to Start
Buying a home is a major financial commitment, and preparation is key.
- Determine Your Budget: Assess your income, expenses, and savings to understand what you can afford.
- Check Your Credit Score: A higher credit score can help you secure better loan terms.
- Save for a Down Payment: Explore assistance programs if needed.
- Get Prequalified: This helps you understand your borrowing power and makes you a more competitive buyer.
- Shop Around: Compare lenders, loan options, and special programs to find the best fit.
Making Homeownership a Reality
Midwest BankCentre wants to help more people achieve their dreams of homeownership and to help families reduce their monthly payments. By creating homeownership and savings opportunities, we help stimulate demand for goods and services, benefiting local businesses, strengthening families, and supporting the communities we serve.
If you’re ready to take the next step, visit MyHomeLoanSTL.com or contact our team of home loan specialists at 314-631-5500.proach to information security including robust policies, procedures, and systems.
Originally published in the Labor Tribune’s March publication by Wes Burns, Executive Vice President of Community and Economic Development.