First Time Home Buyer Interest Rates and Loans: What You Need to Know

by | Oct 1, 2019 | Home buying

Buying a home is a pretty significant financial decision. The good news is that Kansas and Missouri have a wide variety of loans in place to help first time buyers. The bad news is that, if you aren’t careful, interest rates could have you paying a significant amount more than you borrow. Learning about first time home buyer interest rates and loans could save you big bucks in the long run. Read on to learn more.

Fixed-Rate Mortgages vs. Adjustable Rate Mortgages

Adjustable rate mortgages (ARMs) may seem like a great option if you are just looking at interest rates alone, but when the introductory period is over (this could be months or even years), your interest rate will change and the amount of your payment is likely to go up based on a measure of interest rates called an index.

A longer fixed-rate mortgage (FRM) could lead to significant savings even if your interest rate is higher than an ARM initially. Fixed-rate mortgages stay the same no matter what happens to the index mentioned above.

That said, fixed policies typically include early repayment charges. These might come into account if you were to sell or change circumstances during the time of the loan.

In some cases, this can still work out as the cheapest option, but it’s always worth checking individual early repayment rates with your lender.

Loan Options and More

home-interest-rate-conceptSpeaking of lenders, first time home buyer interest rates are kept at a manageable level for people in your position with specific loan options.

If you’re wondering how to finance your home without getting a sky-high interest rate, you might want to consider top first time buyer options like:

First Place Loan

The First Place Loan program is great for people who want low mortgage rates and possibly down payment assistance.

If you choose to go for the program without down payment assistance, you will get below-market interest rates on your mortgage.

Interest rates are usually a 1/4-1/2 of a percentage point lower than rates of First Place Loans with cash assistance.

FHA Loans

FHA loans can be acquired in both Kansas and Missouri. These loans come from approved lenders and allow loans to be given to people with low to moderate incomes with less than perfect credit scores. FHA loans offer lower down payments and interest rates to those who are approved, but they do come with some stipulations that could affect your eligibility.

Note: Mortgage insurance is required for the life of an FHA loan and cannot be canceled.

Guaranteed Rural Housing (USDA)

If you aren’t one for city living, this could very well be the perfect home loan option for you.

Available in both Kansas and Missouri, USDA loans provide 100% financing without a down payment on first-time rural and suburban properties. They require a minimum credit score of 640, and provide seller concessions up to 6%. Gift funds are allowed, as long as property is main residence.

Note: There are some income limitations regarding this loan. Speak with a loan expert for more information.

VA Loans

VA loans are available to active veterans and are a tempting option thanks to their lack of prepayment penalty. While interest terms are up to you as the buyer, even a 30-year fixed rate doesn’t lock you in with this loan.

Tax Credits

Mortgage Credit Certificate

MCCs are available for all first time buyers across Missouri and provide a non-refundable federal tax credit of up to $2,000. That’s a dollar for dollar reduction on federal taxes and can take a great deal of pressure off interest payments.

Note: Income and purchase price limits apply. 

Knowing as much as you can about how interest rates affect your home loan can save you a great deal, so don’t be afraid to do your research and opt for the best deal from the first-time loans on offer.

If you are in the market for a starter home in the Kansas City area or would like more information on the home buying process, contact Dream Homes by Jen at 816-405-2439.

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