mortgage options

Mortgage for Millennials: What Are Your Best Mortgage Options?

Only 41% of millennials are homeowners in the U.S. This means that the majority of millennials are paying rent and aren’t building equity.

If you’re a millennial looking to purchase your first home, you may have felt a little stuck. You might not be sure how to make it happen.

That’s why we put together this guide full of the different mortgage options available to you. Check them out below!

FHA Loan

An FHA loan is one of the most well-known first-time mortgage programs. Funded by the Federal Housing Administration, this is a loan insured by the U.S. Department of Housing and Urban Development.

These are great for first-time millennial homebuyers because you can qualify for a great interest rate and much smaller down payment than the typical 15 or 20%. You’ll often also find lower closing costs.

Depending on your credit score, your down payment could be as low as 3.5%, which makes home ownership much more realistic for many millennials.

Another benefit is that with the FHA’s backing, your lender has an extra form of protection in case anything happens and you default on your mortgage.

Fannie Mae or Freddie Mac

Another government-sponsored mortgage program comes through Fannie Mae and Freddie Mac. This is another way to get a lower down payment, often as low as 3%.

Through the HomePath Ready Buyer program, you’ll be able to get into your home with a much more affordable down payment. Fannie Mae and Freddie Mac will work with local lenders in your area to help you get started in your first home.

They also offer education for first time homebuyers, which always comes in handy.

USDA Loan

Did you know that the U.S. Department of Agriculture (USDA) has a homebuyer assistance initiative? They do!

In fact, in some cases, there’s no down payment required and the loan payments are often fixed. This means extra savings for you!

This program focuses on rural areas. However, this doesn’t mean you have to have a farm to be considered for the program.

The caveat with this is that there are income limitations. These are based by location, so check before you get started to see if you qualify.

Energy-Efficient Mortgage (EEM)

Are you interested in making your home more environmentally friendly? Often, this can be quite expensive. That’s why there are EEM loans.

These are supported through the FHA and VA programs of the government, which gives them even more backing.

The great part about this type of loan is that you can make an environmentally friendly space without having to have a bigger down payment.

VA Loan

Speaking of VA loans, let’s dive a little more into this type of mortgage.

Active-duty members of the military, veterans, and surviving spouses can all benefit from this program sponsored by the U.S. Department of Veterans Affairs (VA).

With the help of the VA, you can often get a no down payment loan. This is a huge financial benefit! You also won’t have to pay for private mortgage insurance.

What’s more is that there is no minimum credit score requirement. The government wants to help out our military, so this program is super accessible!

Lender-Branded Specialty Mortgage Options

Lenders are noticing the popularity of specialty mortgage options, and in many cases are creating their own to attract more millennials.

Depending on the bank, there are lots of different mortgage deals out there. Many lenders are even offering a 3 percent down payment option, which used to be unheard of from a commercial institution.

It’s a good idea to shop around as you’re looking for mortgage lenders. There are often great deals to be found as you check out all your options. These can often be seasonal deals too, so continue to check back if you don’t find anything right now.

Piggyback Loans

If you’re wanting to avoid monthly mortgage insurance payments, look for a lender with a piggyback loan option.

These are loans also known as 80/10/10 loans. Here’s how they work.

You make a 10% down payment and get a loan to cover the first 80% of the home. Then you get a second mortgage to cover the other 10%.

Over the years, these loans have made homeownership a reality for many people. But they do have their drawbacks.

First, it requires a lot of money to pay for two mortgages at once. They also only work if you have a high credit score.

But if it works for you, they are a good option.

Good Neighbor Next Door

Are you a firefighter, pre-k through 12th-grade teacher, EMT, or law enforcement officer? If so, this one is for you!

The Good Neighbor Next Door program is also sponsored by the U.S. Department of Housing and Urban Development and was created to help out these important members of our community.

You’ll be able to get 50% off the price of specific homes in “revitalization areas.”

To qualify, you must agree to living in the home for at least 3 years. But talk about an incredible deal if this works for you!

For even more tips on millennial mortgages, check out this overview.

Final Thoughts

There you have it: some great mortgage options for millennial home buyers. Now that you’ve gone through these tips, it’s time to make your choice. What option works best for you?

If you have questions or want to learn more about home buying, check out our Home Tips blog. It’s full of great information.