Summary List PlacementTable of Contents: Masthead StickyBuying your home may feel like an insurmountable challenge, because you have to meet multiple requirements to qualify. Conventional mortgages typically mandate at least a 620 credit score and 36% debt-to-income ratio. Many lenders also ask for at least 10% toward a down payment. These requirements can be tricky for first-time homebuyers to meet, especially if you're young. Thankfully, there are plenty of programs designed to help out first-time homebuyers. You do have to meet some conditions to qualify for such programs. But when it comes to your finances, these loans and grants have more lenient requirements for getting a mortgage than conventional loans.
Here are 11 programs for first-time homebuyers: Government-backed loans Unlike conventional loans, government-backed mortgages are guaranteed by federal agencies. If you default on your payments, then the agency pays the lender on your behalf. This guarantee allows lenders to offer you a mortgage even if you don't meet the usual conditions for a conventional loan. FHA loan With a Federal Housing Administration loan, you only have to put 3.5% down. Lenders are looking for DTIs of 43% or less, and credit scores of 580 or higher. You can still apply with a credit score between 500 and 579, but you'll need a down payment of 10%. You will have to pay some premiums, though. At closing, you'll pay a mortgage insurance premium that comes to 1.75% of your loan. Then you'll pay an annual premium of 0.45% to 1.05% of your loan, depending on your term length, loan amount, and loan-to-value ratio. USDA loan You may qualify for a mortgage through the United States Department of Agriculture if you a) buy a home in a rural or suburban area, and b) earn a low-to-moderate income. The income requirements vary by state. You don't need any down payment for a USDA-backed loan. There are no official credit score or DTI obligations for a USDA loan. But according to USDAloans.com, your chances will improve if your credit score is at least 640 and DTI is 41% or lower. VA loan Active and former military members could qualify for a loan from Veterans Affairs. You don't need a down payment, and the VA doesn't set a minimum credit score or DTI. Although the loan is backed by the VA, you'll still get the loan through a traditional lender, so the lender will set the credit score and DTI guidelines. You won't have to pay mortgage insurance, but you'll pay a funding fee that protects the lender should you default on your payments. Your funding fee amount will depend on various factors, including how much you borrow, how much you have for a down payment, and whether this is your first time getting a VA loan. You may choose to pay the entire funding fee at closing, or roll the fee into your monthly mortgage payments. Loans backed by Fannie Mae or Freddie Mac The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) are two government-sponsored mortgage companies. You can get a conventional loan backed by either company. You'll still need a 620 credit score, but only a 3% down payment. The maximum DTI allowed will depend on the strength of the rest of your financial profile. State or local first-time homebuyer programs You may qualify for a grant or loan based on where you live. These programs are meant for buyers who don't qualify for a conventional mortgage, and eligibility is specific to the area. Once you've found programs in your city or state, research which lenders participate in the programs. Loans for homes that need renovations Fannie Mae HomeStyle loan The HomeStyle loan is for homes that need repairs after moving in. You'll only need a 3% down payment if a) you're living in the house rather than letting someone else live in it or renting it out, and b) at least one of the people taking out the loan is a first-time homebuyer. Freddie Mac CHOICERenovation loan The CHOICERenovation loan is similar to the Fannie Mae HomeStyle loan. More specifically, it can be a good option if you're looking to disaster-proof your home with improvements such as retaining walls or flood barriers. FHA 203(k) loan This loan has stricter regulations about what types of improvements can be made than the HomeStyle or CHOICERenovation loans, but you can qualify with a lower credit score. Place as little as 3.5% down if your credit score is 580 or higher, and 10% if your score is between 500 and 579. Energy Efficient Mortgage program An EEM lets you roll the costs of energy-efficient repairs into your mortgage without making a bigger down payment. You can improve things like your furnace, insulation, or thermostat system with an EEM. You'll need a down payment of 3.5% if your credit score is at least 580, or 10% if your score is between 500 and 579. Good Neighbor Next Door You may qualify for the Department of Housing and Urban Development's Good Neighbor Next Door program if you're a teacher, firefighter, law enforcement officer, or emergency medical responder who lives in a "revitalization area." Go the Good Neighbor Next Door website to search for homes in your area. Homes are listed for seven days, and you can purchase one for 50% off the listed price. Native American Direct Loan The NADL is for Native American military veterans, and it's issued through the VA. You don't need money for a down payment, and you won't pay private mortgage insurance. With a regular VA loan, a lender gives you a mortgage that is backed by the VA. With a NADL, the VA is actually your lender. Related Content Module: More Mortgage CoverageJoin the conversation about this story »
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A OneMain Financial Personal loan is available to people with all credit types, including those...A OneMain Financial Personal loan is available to people with all credit types, including those with bad credit. The bank doesn't have a minimum required credit score to apply. However, borrowers with better credit scores could get a better rate elsewhere. Interest rates range from 18.00% - 35.99% APR. Same-day funding is a plus for borrowers who need money quickly, but high fees add to the costs. See Business Insider's list of the best personal loans of 2020 » OneMain Financial's personal loans are a good option for personal loan borrowers who have a low credit score. Personal loans are known for being relatively selective, as there's often no collateral like a car or house that could help the bank recoup their money. Generally, lenders require a good or better credit score to consider applications for personal loans. OneMain Financial doesn't list an official minimum credit score, and could help you get approved for a personal loan. However, getting approved doesn't mean it will be cheap to borrow — OneMain's personal loans have high starting interest rates. Anyone with a good or better credit score could likely get a better interest rate on a personal loan elsewhere. Should you get a personal loan with OneMain Financial? You might like a personal loan from OneMain Financial if you: Have a credit score between 600 and 650, the average credit score for this lender's personal loan borrowers You've had trouble getting approved elsewhere, since OneMain doesn't have a minimum credit score requirement You want a secured personal loan Live near a branch — OneMain Financial has branches in 44 states A personal loan with OneMain Financial might not be right if you: Have a good or better credit score, as you could probably find better interest rates elsewhere Want an entirely online loan application, as the loan will need to be completed at a branch Live in Alaska, Arkansas, Connecticut, Massachussetts, Rhode Island, or Vermont, where there are no branches The pros of a OneMain Financial personal loan This lender doesn't have a minimum credit score for approval OneMain Financial could help you get approved for your personal loan if you've had trouble getting approved through other lenders. Most personal loan lenders require credit scores above 660 to apply. Potential for a small loan OneMain's smallest possible loan is $1,500, which could help you avoid borrowing more than you need to. Competing lender Avant Personal Loans has a minimum loan amount of $2,000. It's worth noting that some states have higher minimum loan amounts, however. Alabama: $2,100 minimum loan amount California: $3,000 minimum loan amount Georgia: $3,100 minimum loan amount, waived for current customers Ohio: $2,000 minimum loan amount Virginia: $2,600 minimum loan amount Same-day loans available If you need cash quickly, OneMain Financial states that loans can be funded the same day they're approved. Funds are available by direct deposit or by check at closing. Secured and unsecured loans are available Most personal loans are unsecured, without collateral like a house or car backing up the loan. This is one of the reasons personal loans can have such high interest rates. OneMain gives personal loan borrowers the option for a secured loan, which involves listing a car or other valuable object on the personal loan. Adding collateral to your loan will reduce your interest rate. Flexible loan terms Unlike some other lenders, OneMain allows several options for repayment, with term lengths of 24, 36,48, or 60 months. It's one of the few personal loan lenders of its type with physical locations If you value the ability to go to a branch and talk to an employee about your loan, OneMain might be the best choice. Other brick-and-mortar banks offering personal loans, like Wells Fargo, Santander, and PNC, have high credit score requirements. The cons of a OneMain Financial personal loan High starting interest rates OneMain Financial shouldn't be your first choice if you have good or better credit. Interest rates at OneMain range from 18.00% - 35.99% APR. Borrowers with credit scores of 650 or above could get approved through another lender for lower interest rates. Loan application process has to be completed at a branch While you can start the process online, you'll have to complete the process of applying for a personal loan at a OneMain branch. OneMain Financial has branches in 44 states, but none in Alaska, Arkansas, Connecticut, Massachussetts, Rhode Island, or Vermont. High origination fees OneMain charges an origination fee on loans, which can either be a flat fee or percentage-based, depending on what state you live in. Flat fees range from $25 to $400, while percentage-based fees range from 1% to 10% of the loan's value. Loan origination fees are available on the loan agreement, making it hard to tell what you'll be charged in advance. OneMain Financial personal loan features Aside from the fact that this lender will consider borrowers with any credit score, there are other perks to OneMain Financial personal loans. Most notably, OneMain offers same-day funding. Existing OneMain customers can receive funds same-day through direct deposit, while non-customers could have to wait one or two business days. However, any customer can receive a check at the branch during the loan's closing. Additionally, this lender offers a secured loan option. These loans could help borrowers get a lower interest rate on their personal loans with collateral, generally a car, backing the loan. OneMain Financial personal loans don't have any prepayment fees, allowing borrowers to save on interest by repaying the loan sooner than the expected payoff date. Payments can be made online, in a branch, by phone, or through OneMain's mobile app. How does OneMain Financial compare? OneMain Financial personal loan Avant personal loan LendingClub personal loan Minimum credit score requirement None 580 600 Interest rate range 18.00% - 35.99%APR From 9.95% to 35.99% APR 10.68% to 35.89% APR Origination/administrative fee? Fee type depends on state. Flat fees: $25- $400; percentage-based fees: 1%- 10% of loan's value. Up to 4.75% 2% to 6% Loan terms available 24, 36, 48, or 60 months 24 to 60 months Terms start at 36 months Secured loans available? Yes Yes No Loan amounts available $1,500-$20,000 $2,000-$35,000 Up to $40,000 When are funds available? Same-day available Next business day As soon as 4 business days OneMain Financial vs. Avant personal loans OneMain Financial and Avant Personal Loans have similar loan terms and loan amounts, but borrowers looking for same-day funds might find that OneMain has an advantage. Additionally, a minimum credit score requirement of 580 might exclude some borrowers. However, Avant could be a stronger option than OneMain due to OneMain's higher interest rates. Additionally, fees at Avant could be lower, as this lender caps its origination and administrative fees at 4.75%, while OneMain's fees could go up to 10%, or $400 depending on your state. OneMain Financial vs. LendingClub personal loans LendingClub's minimum 600 credit score requirement might leave some borrowers out. With interest rates starting higher, borrowers who qualify with LendingClub could get lower rates from Avant or OneMain. LendingClub doesn't offer a secured loan option, which could give OneMain an advantage for anyone who wants to lower their interest rate with collateral. Funding through LendingClub will take at least four business days, according to the lender's site, giving OneMain's same-day funding another advantage. Related Product Module: Related ProductRelated Content Module: More Personal Finance CoverageJoin the conversation about this story »
The average mortgage interest rate on a 30-year fixed rate loan in the US is...The average mortgage interest rate on a 30-year fixed rate loan in the US is 3.15% as of May 28, 2020. But interest rates vary by person, so that won't necessarily be the mortgage rate you'll see at closing. Your interest rate depends largely on your credit score, the type of home loan you're choosing, and even what's happening in the larger economy. Sign up for Personal Finance Insider's email newsletter here » The average interest rate for the most popular 30-year fixed mortgage is 3.15% as of May 28, 2020, according to data from the Federal Reserve Bank of St. Louis. Mortgage interest rates are always changing, and there are a lot of factors that can sway your interest rate. While some of them are personal factors you have control over, and some aren't, it's important to know what your interest rate could look like as you start the getting a home loan. Table of ContentsAverage mortgage interest rate by type There are several different types of mortgages available, and they generally differ by the loan's length in years, and whether the interest rate is fixed or adjustable. There are three main types: 30-year fixed rate mortgage: The most popular type of mortgage, this home loan makes for low monthly payments by spreading the amount over 30 years. 15-year fixed rate mortgage: Interest rates and payments won't change on this type of loan, but it has higher monthly payments since payments are spread over 15 years. 5/1-year adjustable rate mortgage: Also called a 5/1 ARM, this mortgage has fixed rates for five years, then has an adjustable rate after that. Here's how these three types of mortgage interest rates stack up: Mortgage type 30-year fixed rate mortgage: Average APR 30-year fixed mortgage 3.15% 15-year fixed mortgage 2.62% 5/1-year adjustable rate mortgage 3.13% Average mortgage interest rate by credit score National rates aren't the only thing that can sway your mortgage rates — personal information like your credit history also can affect the price you'll pay to borrow. Your credit score is a number calculated based on your borrowing, credit use, and repayment history, and the score you receive between 300 and 850 acts like a grade point average for how you use credit. You can check your credit score online for free. The higher your score is, the less you'll pay to borrow money. Generally, 620 is the minimum credit score needed to buy a house, with some exceptions for government-backed loans. Data from credit scoring company FICO shows that the lower your credit score, the more you'll pay for credit. Here's the average interest rate by credit level in June 2020: FICO Score National average mortgage APR 620 to 639 4.52% 640 to 659 3.97% 660 to 679 3.54% 680 to 699 3.35% 700 to 759 3.15% 760 to 850 2.93% According to FICO, only people with credit scores above 700 will truly see interest rates at the national average. Average mortgage interest rate by year Mortgage rates are constantly in flux, largely affected by what's happening in the greater economy. Generally, mortgage interest rates move independently and in advance of the federal funds rate, or the amount banks pay to borrow. Things like inflation, the bond market, and the overall housing market conditions can affect the rate you'll see. Here's how the average mortgage interest rate has changed over time, according to data from the Federal Reserve Board of St. Louis: Year Average 30-year fixed mortgage rate (January) 2000 8.15% 2001 7.07% 2002 7.14% 2003 5.85% 2004 5.87% 2005 5.77% 2006 6.15% 2007 6.18% 2008 6.07% 2009 6.01% 2010 5.09% 2011 4.77% 2012 3.87% 2013 3.34% 2014 4.53% 2015 3.73% 2016 3.97% 2017 4.20% 2018 3.99% 2019 4.75% 2020 3.72% Since January 2020, the mortgage rate has fallen drastically in several months due to the economic impact of the coronavirus crisis. By late May 2020, the 30-year fixed mortgage's 3.15% average interest rate has become the lowest seen in many years, even lower than even rates at the depths of the Great Recession. Thirty-year fixed mortgage interest rates hit a low of 3.31% in November 2012, according to data from the Federal Reserve of St. Louis. Average mortgage interest rate by state The state where you're buying your home could influence your interest rate. Interest rates for a 30-year mortgage ranges from 3.18% in Hawaii to 3.76% in Mississippi. Here's the average interest rate by loan type in each state according to data from S&P Global. State 15-Year Fixed 30-Year Fixed 5/1 ARM Alabama 3.04 3.44 3.46 Alaska 2.79 3.27 3.13 Arizona 2.89 3.48 3.38 Arkansas 3.2 3.74 3.56 California 2.88 3.52 3.15 Colorado 2.97 3.51 3.33 Connecticut 2.95 3.41 3.03 Delaware 2.86 3.48 3.08 District of Columbia 2.85 3.4 2.97 Florida 2.81 3.45 3.23 Georgia 2.9 3.53 3.29 Hawaii 2.69 3.18 2.53 Idaho 2.92 3.42 3.27 Illinois 2.91 3.45 3.25 Indiana 2.91 3.38 3.31 Iowa 2.82 3.32 3.34 Kansas 3.13 3.63 3.61 Kentucky 3.02 3.51 3.33 Louisiana 3.1 3.59 3.36 Maine 3.19 3.52 3.49 Maryland 2.78 3.39 3.09 Massachusetts 3.01 3.56 3.55 Michigan 2.99 3.43 3.13 Minnesota 2.89 3.37 3.04 Mississippi 3.42 3.76 3.62 Missouri 3.05 3.57 3.51 Montana 3.18 3.63 3.31 Nebraska 2.98 3.48 3.57 Nevada 2.8 3.43 3.14 New Hampshire 3.02 3.47 3.46 New Jersey 2.87 3.44 3.32 New Mexico 3.06 3.59 3.4 New York 2.96 3.42 3.31 North Carolina 3.07 3.54 3.31 North Dakota 3.15 3.46 3.39 Ohio 2.95 3.39 3.01 Oklahoma 3.13 3.61 3.41 Oregon 2.88 3.48 3.3 Pennsylvania 2.9 3.42 3.43 Rhode Island 2.99 3.56 3.45 South Carolina 2.96 3.54 3.33 South Dakota 3 3.5 3.13 Tennessee 3.18 3.68 3.48 Texas 2.99 3.51 3.54 Utah 2.77 3.33 3.08 Vermont 2.96 3.39 3.1 Virginia 2.94 3.43 3.36 Washington 3 3.44 3.45 West Virginia 3.28 3.7 3.46 Wisconsin 2.97 3.44 3.36 Wyoming 3.15 3.6 3.58 More personal finance coverage 4 reasons to open a high-yield savings account while interest rates are down Here's the average auto loan interest rate by credit score, loan term, and lender The best high-yield savings accounts right now Here are the banks with the best CD rates The best rewards credit cards 7 reasons you may need life insurance, even if you think you don't Join the conversation about this story » NOW WATCH: Why Pikes Peak is the most dangerous racetrack in America
My credit score dropped 11 points when I bought a house, but I'm confident the mortgage will actually boost my credit in the long run
After closing on a mortgage to buy a house, my score dropped by 11 points,...After closing on a mortgage to buy a house, my score dropped by 11 points, but I'm not too worried, because I understand why my score dropped and how a home loan could actually improve my credit in the long run. Before approving me for my mortgage, my lender did two hard pulls on my credit, which lowered my credit score by about two points each time. My home loan also increases my total debt, which increased my credit utilization ratio. This ratio accounts for 30% of my FICO score, and a lower credit utilization is better. As long as I make on-time payments on my mortgage, my credit score could actually get even higher in the long run. Having a mortgage also improves my credit mix, which can positively impact my score. Personal Finance Insider's email newsletter is coming soon! Sign up here » During the two years I spent preparing to buy a house, aside from saving up money towards my down payment, I also knew that I had to start babying my credit score. I made a point of making all my payments on time and paying my balances off in full every month. Plus, I made sure to avoid applying for any new credit cards or line increases. In the end, my hard work paid off. When I applied for my mortgage, I had my highest credit score ever and I was able to use it to secure an affordable interest rate on my loan. What I wasn't quite prepared for was the fact that my score would drop after closing on my new home, just as I had gotten used to having great credit. Despite the fact that my score has taken a dip, I'm not too worried. In fact, I think taking on additional debt in the form of a home loan will actually help improve my score in the long term. Here's a closer look at why I'm betting I'll ultimately see my score go up. How credit scores are determined Before getting into specifics, it's important to understand how credit scores are determined. The reality is that your score with each of the credit bureaus is based on a mix of factors that each account for a different percentage of the number you're given. This is how your FICO score breaks down: Payment history (35%): Whether or not you have a history of making your payments on time has the greatest impact on your overall score. To that end, it's crucial to make sure that you pay your credit card bill on time, every time. Credit utilization rate (30%): Your credit utilization ratio looks at what percentage of your total available credit you've used. For the best results, you should try to keep this ratio under 30% whenever possible. Length of credit history (15%): While you can't really do much to speed this one up, the longer your accounts have been open and you have a history of making timely payments, the higher your score will be. Credit mix (10%): Credit scores take into account the total amount of outstanding debt that you have, as well as the different types of credit that you use. Your FICO score tends to favor having a variety of loan types on your credit report, including installment loans and revolving credit. Recent applications (10%): Every time you apply for a loan, the lender does what's known as a "hard pull" on your report in order to check your credit score. Each pull will ding your score by a few points and stay on your report for about two years. Having too many pulls on your report at one time can also hurt your score. Why my score took a temporary hit Throughout the process of buying a house, my score dropped 11 points in total. However, given the above information, it honestly makes sense that it took a dip. In applying for and eventually receiving my mortgage, several things happened that impacted my score, including: New hard pulls on my credit: My lender pulled my credit twice during the application process, once when I initially applied for the loan and once right before the loan was issued to ensure that nothing had substantially changed. Each time there was a credit pull, my score dropped about two points. New open account: Opening a new account can also negatively impact your score in the short term. In this case, it did because it added to my overall debt. Before getting a mortgage, I only had a few thousand dollars' worth of student loans left to my name. Now, I also owe hundreds of thousands of dollars in housing debts. Why I'm betting I'll have an even better score in the future Ultimately, though, I'm guessing that the drop in my score will only be temporary. In fact, I have reason to believe that, over time, taking on more debt in the form of a mortgage will actually make my score higher than it was when I was approved for my loan. It all comes down to the following factors: Updated payment history: According to Experian, the dip in scores from opening new accounts is only temporary. It advises that as long as I continue to make timely payments on my new account, my score should rebound shortly. Lowered amount of total debt: As I continue to make payments toward my mortgage, the total amount of debt that I have to my name will go down, which will help my credit utilization ratio. Better credit mix: By adding a new installment loan to my credit report, I am diversifying. Before I got a mortgage, the bulk of my profile was made up of revolving credit or credit cards. Now, the distribution is more even. 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