First-time home loans, backed by a government agency, are wonderful programs that can help open doors for a family that may not otherwise been able to afford to buy a home. These home loans help to benefit everyone in the community, because home owners are more likely to take care of their property than renters, and they’re more likely to get involved with their community.

These loans provide a number of benefits to buyers. First of all, they usually allow you to buy a home with a very low down payment, or in some cases, no down payment. These programs may subsidize some or all of your interest costs. There may be grants to help buy your home. These programs usually limit the fees that lenders can charge you. They also may be able to defer payments for you.

Still, a first time buyer home loan isn’t always the right choice, even if you’re thinking about buying a home for the first time. There are some specific circumstances in which you might think twice about taking out a first time buyer home loan:

• First time buyer home loan programs often limit the price of the home you can buy. This means you may be faced with buying a home with a lower value than the home that you’d prefer to have.
• In some cases, you can lose benefits of the program if you decide to move out of and sell your home within a certain amount of time. Typically, for many programs, you need to live in the home five full years before you’re able to move without penalty.
• You might have a limit to the type of loans you can take out. Some programs will only let you have a 30-year fixed rate mortgage, for example.
• Some programs require you to share the appreciation on your home. That is, when your home increases in value, the program gets a cut.

If you have excellent credit, you’re probably better off with a traditional mortgage rather than a subsidized first time buyer home loan. If your credit score is below 680, the benefits of these programs increase, as they give you more options.

Photo via Jacquie