First Time Home Buyer Programs

11 First Time Home Buyer Programs You Need to Know

Buying a home for the first time can be scary. After all, it is a major financial commitment which usually requires a 20% down payment based on the property price. This is why you need to know the top First Time Home Buyer Programs!

Unless you have a lot of cash lying around or a trust fund, chances are you’ll need some assistance in buying your first home. But don’t worry —there are many benefits for first time home buyers and this is where first time home buyer grants and programs come in.

What are First Time Home Buyer Programs?

Grants refer to funds you receive but don’t have to pay back as long as you abide by the terms. For first time home buyers, grants usually require you to occupy the property for a designated period. Your income should also be within a certain limit to apply for one.

You would only need to pay back the grant if you violate the terms.

How First Time Home Buyer Grants Work

First Time Home Buyer Grants usually come in the form of down payment assistance. The local housing finance authority administers these grants. Some programs offer forgivable zero-interest loans to help buyers pay for their down payment and closing costs subject to terms and conditions.  

Aside from grants, there are also government programs that reduce or eliminate the down payment. While there’s no shortage of first-time home buyer grants and programs out there, you need to meet certain requirements to be eligible.

Another thing to note is that most of the grants are also tied up to a particular program. If you’re up for getting assistance on buying a new property for the first time, here are some of the programs and grants to check out.

Multi-state Programs for First Time Home Buyers

Some first time home buyer programs are available nationwide. Here are some grants and programs that you can apply for wherever you live.

FHA Loan

The Federal Housing Administration under Housing and Urban Development provides assistance to first time home buyers by backing the mortgage. The FHA loan is also one of the most affordable loans for the first time home buyer.

For an FHA loan, the down payment can be as low as 3.5% if your credit score is at least 580. Borrowers with scores between 500 and 579, need to make a 10% down payment. FHA loan limits or the maximum amount you can borrow under this loan varies depending on your state. Median home values in your area and the property type will influence this limit.

For 2019, the national limit for a one-unit property is $484,350. You can check the limit in your area using the HUD database. To help you picture out the total cost, it may be useful to check out this FHA loan calculator.  

While FHA loan is a national program, grants related to down payment assistance is usually available at the state level. First Down, one of the first time home buyer grants in Rhode Island offers down payment assistance of $7,500 which is forgivable after five years.

HUD 203 (k) loans

If you plan on buying a that needs improvements, 203 (k) is one of the HUD loans that may be useful to you. This loan covers the purchase price of the property and the cost to cover repairs. You may also use the proceeds to cover your mortgage or rent for up to six months while construction is ongoing.

Grants applied to HUD 203(k) loans are usually administered through local and state housing finance agencies.

USDA Loans for rural areas

The United States Department of Agriculture (USDA) offers several loan programs for housing in rural areas. Among these types of USDA loans, first time home buyers usually go for the Single Family Housing Guaranteed Loan Program.

This USDA loan targets low to very low-income households. You need to file an application to this program with your local Rural Development office. Eligible properties are usually in a rural area with a population of less than 35,000.

USDA loan rates can be as low as 1% with a 33-year payback period. You may request for an extended loan term of up to 38 years. Usually, you don’t need to make any down payment.

If you’re interested in this program, check out the USDA website for more details. There’s also a downloadable Excel USDA calculator may be useful to you.

If you are a very low-income earner aged 62 and above, you may also qualify for the Single-Family Housing Repair Grant.  You can receive up to $7,500 under the grant to help you repair your home. The only condition is for you not to sell the property for at least three years.

National Homebuyers Fund Down Payment Assistance program

Under the National Homebuyers Fund program, you can receive a grant of up to 5% of the loan amount as down payment or closing cost assistance.

This first time home buyer grant actually gives you free money since the amount given to you is forgiven after three years. However, there are limits and income requirements related to your housing market and location.

This down payment assistance program is available through participating lenders nationwide.

Homeownership Voucher Program

For low-income families and residents of public housing, first time home buyers may receive subsidies for buying a house. This program is administered through the local Public Housing Agency.

First Time Home Buyer Programs Related to Profession/Job

Government agencies, lenders and private organizations may also extend grants to individuals of certain professions.

Veterans Affairs Loans for Military Personnel

Military personnel (veteran or active duty) looking to buy a new home may take out a loan. Aside from VA loans for purchasing a new home, veterans may also apply for Adapted Housing Grants. If you have a service-related disability, it’s possible to receive a grant to purchase a home designed or upgraded to make it more accessible for you.

For this purpose, you may apply for the Specially Adapted Housing (SAH) Grant and the Special Housing Adaptation  (SHA) Grant.

SAH Grant involved building a home or remodeling an existing home to accommodate the disability. The maximum amount under this grant is $37, 597. On the other hand, if you are adapting a home to accommodate the disability, you are eligible for up to $6,713 under the SHA Grant.

Good Neighbor Next Door Program

If you are a law enforcement officer, firefighter, emergency medical technician, or a teacher, you may be qualified for the Good Neighbor Next Door Program. Under this grant, you can purchase a single-family home listed by the Housing and Urban Development for half the price.

If the list price of a property is $150,000, you can buy it for only $75,000. Aside from that, you may also apply for USDA, VA, and FHA programs to help you purchase the property.

On the flip side, this program limits your choices to HUD listings in your state which will change every week. If you decide to join this program, the property you purchased should be your only residence for 36 months. After this period, you have the option to sell the property.  

Programs like Teacher Next Door also offer grants of up $4,170 to teachers and professionals other than teachers including government employees, soldiers, medical professionals, and non-teaching school staff. Aside from that, you may also be eligible for the down payment assistance of up to $10, 681. This grant is available to owner-occupant buyers and has no residency requirement.

Government-sponsored First Time Home Buyer Programs

Private companies providing financial assistance to the public also provide programs useful to first time home buyers.

Fannie Mae Loans for First Time Homebuyers

Fannie Mae home loans offer programs with a down payment of as little as 3% under the HomePath mortgage program and the standard 97% LTV program. Mortgage rates for these loans are fixed, and the maximum term is 30 years. Some Fannie Mae mortgage lenders are JPMorgan Chase Bank, Sun Trust Bank, and Wells Fargo Multifamily Capital.

Other than providing low down payment loans, Fannie Mae also provides closing cost assistance for Home Path property buyers. Under this grant, first time home buyers can receive up to 3% of closing cost assistance if they completed the HomePath Ready Buyer course. If the sales price of the property you bought is $200,000, you will receive closing cost assistance of $6,000. If the closing costs are less than the grant amount, you will not receive any credit for the difference. You also need to use the property as your primary residence for 60 days after closing.

Freddie Mac’s Home Possible and Home Possible Advantage Program

Freddie Mac first time home buyer programs include Home Possible which allows borrowers from low to moderate-income households to purchase homes with a 5% down payment. Another program, Home Possible Advantage, only requires a 3% down payment for one-unit properties.

Freddie Mac used to have a 1% down payment where the lender gifts 2% to the buyer. Unfortunately, this program has been discontinued but there are state programs which offer down payment assistance grants for Freddie Mac loans.

Statewide/ Citywide First Time Home Buyer Programs

Most first time home buyer grants and programs depend on your income and your location. So, it’s always better to start with the programs in your city or county. Each state also offers specific first time home buyer grants to its residents.

First time home buyer grants in NY, for instance, have the State of New York Mortgage Agency Down Payment Assistance Loan. This grant extends forgivable loans up to $15,000 if you meet the income bracket and if you stay in the property for 10 years.

Meanwhile, first time home buyer grants in Texas offers up to 5% of the mortgage amount as down payment assistance to state residents who are low to moderate income earners and Texas Heroes such as first responders, teachers, and veterans.

First time home buyer grants in Wisconsin and Illinois, on the other hand, has a Downpayment Plus program. This grant administered by the Federal Home Loan Bank of Chicago offers a matching grant worth three times the borrower’s contribution to the purchase of the property.

The grant’s limit is $6,000 and the minimum buyer’s contribution is $1,000. So, for a minimum contribution, the buyer will receive a grant of $3,000 for a property located in either Wisconsin or Illinois and the grant will be forgiven over five years.

Other First Time Home Buyer Programs

Aside from the grants mentioned above, here’s another program which may be applicable to you.

Energy Efficient Mortgage Program

If you are planning to make improvements in your home to increase its energy efficiency, you may take out an FHA loan under the Energy Efficient Mortgage program.

The improvements under EEM will be part of your mortgage and you may exceed the loan limit without needing to make an additional down payment. These improvements may include upgrades in air conditioning, and ventilation to reduce utility bills.

While not technically a grant, you can take a residential energy efficient property credit of up to $500. This credit is applicable for wind, solar, geothermal, and fuel cell technology equipment installation.

Caution – Not all lenders work with grant programs

Did you find any first time home buyer grant you find interesting? If yes, make sure that you find a participating lender. Not all lenders work with grant programs even the ones backed by the government. In fact, some lenders don’t participate in first time home buyer grants.

Usually, each program will provide a list of participating lenders.

Pro Tip: Find a loan officer who has experience with a particular grant. This makes the process convenient for all parties.

Tips for Using First Time Home Buyer Programs

If you are applying for a grant, expect the application process to involve more paperwork. While accomplishing the paperwork be sure to provide accurate and truthful information.

Don’t forget to look into the requirements of the grant or program. Most grants and programs are strict on occupancy and property ownership. In some cases, you can’t use the home for commercial purposes or accept tenants. Always read and understand the requirements properly to see if it is in line with your future plans.

Start Your Search Close to Home

Buying a home is expensive but there are ways to pull down the costs. Through first time home buyer grants and programs, you can take advantage of free money and lower interest rates. Of course, these sweet deals are subject to terms and conditions. 

Remember that most grants are for low-income households. So, your eligibility will hugely depend on your income level. If your income is over the limit, you may not qualify for grants. But there are still other programs that could help you.

Aside from the local housing authorities, it may be helpful to discuss taking advantage of grants programs with your broker. Experienced brokers can be an invaluable source of information about these things. These experts may help you determine your eligibility for first time home buyer grants. They may also offer suggestions to help you find a loan term that works for you.

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