When you buy your first home, it can be a very stressful event. It can be exciting and frustrating simultaneously, particularly because many people face significant financial challenges. With the down payment savings, the mortgage approval process, and covering closing costs, a lot can hold someone back from buying a home. Fortunately, it is possible to get assistance from a wide range of first-time home buyer programs.
To learn more about housing grants for first time home buyers, find out what they are and how they work below.
Understanding Housing Grants For First Time Home Buyers
Housing grants for first time home buyers are awards paid to new U.S. homeowners. They are awarded on a local, state, and federal level by the government that do not require repayment. The public good of homeownership and community is important to first-time home buyers.
In addition to reducing mortgage rates, providing tax credits, and helping with down payments, several programs for first-time home buyers are introduced below.
Popular Housing Grants For First Time Home Buyers
There is no greater economic benefit than homeownership. Here is a list of housing grants for first time home buyers:
First-time home buyer programs offered by the Federal Housing Administration are the most popular. These loans are insured by the Federal Housing Administration, a part of the U.S. Department of Housing and Urban Development (HUD). Since the government backs them, there is less risk to the lender, and the lender can accept lower credit scores and down payments, which is ideal for young or first-time buyers.
Your residence should be the primary one, which is a requirement for an FHA loan. A 3.5% down payment may be required for home buyers with credit scores of 580 or above. An average home buyer’s credit score can range between 500 and 579 with a 10% down payment. Take note that as the credit score declines, the interest rate increases.
There are specific location requirements for USDA loans. Some good programs offered by the USDA Rural Development Guaranteed Housing Loan Program are to assist rural buyers in getting mortgages with no down payment. If you are considering moving to a small town, this program is a great option. You may be eligible for this first-time home buyer program if you plan to purchase your primary residence in a rural area that is eligible for it.
For USDA loans, there is no down payment required because they are specifically designed for low-income households. However, a mortgage insurance policy is. Income eligibility can be checked online through the USDA’s website.
Families and survivors of active military personnel and veterans are eligible to apply for VA loans. The U.S. Department of Veterans Affairs provides VA loans, which the government backs instead of the Federal Housing Administration. Though VA loans are generous, sellers in competitive real estate markets are less likely to want them. Loans backed by the government are subject to extra restrictions and regulations.
VA loans, however, have many advantages. Prepayment penalties are not applied, and there is no down payment or mortgage insurance. First-time homebuyer programs are popular, but this one can be used more than once. Using a VA loan for a downsized retirement home or a first home is an option for military families. If you want to learn more about this topic, check out our article about veteran first home buyer.
HUD Good Neighbor Next Door Program
Public servants can buy affordable homes through the Good Neighbor Next Door Program run by HUD. It is possible for them to finance properties for as little as $100 down and get them for 50% off retail. Federal Housing Administration-insured mortgages finance the foreclosed properties that are available for purchase. The HUD sells foreclosed properties once the government takes them over.
The program may be available to law enforcement officers, teachers, firefighters, and emergency medical technicians working for agencies, schools, or departments in the area where the home is located. When bidding on a Good Neighbor Next Door property, you or your spouse should have never bought a Good Neighbor Next Door home or owned a home in the past year.
After the purchase, you must certify that you will continue working as an officer of the law, a teacher, a firefighter, or an EMT, you agree to own the home and live there as your residence for three years, and that you will be there every year. A copy of the HUD certification is mailed to the homeowner annually, which they must sign and return.
National Homebuyers Fund Down Payment Assistance
Grants are sometimes provided instead of mortgage assistance to first-time home buyers. An example is the Down Payment Assistance (DPA) offered by the National Homebuyers Fund (NHF). They are provided to qualified borrowers, including first-time home buyers and repeat buyers, by the NHF as a nonprofit public benefit corporation.
There is a 5% loan assistance available for down payments and closing costs up to the mortgage loan amount. The assistance won’t be one-size-fits-all, so the buyer may be able to forgive or repay the loan, depending on their situation.
Native American Direct Loan
Those who are Native American veterans or married to veterans are eligible for Native American Direct Loans (NADLs). Homes on federal trust lands can be purchased, built, or improved through NADLs. As with other VA loans, it is a reusable benefit, but it is especially popular with first-time home buyers.
In addition to low-interest rates, NADLs do not require private mortgage insurance and down payment. Contact your Regional Loan Center with questions regarding this or any other VA loan.
HomePath Ready Buyer Program
Among the two government-sponsored enterprises that fund the mortgage market, Fannie Mae’s HomePath Ready Buyer program helps homebuyers get into the market. A portion of the purchase price can be applied towards closing costs with this program. However, you cannot buy anything other than HomePath properties, which are foreclosed homes owned by Fannie Mae. As part of your homebuyer education, you’ll be required to take a course.
Bank Of America Grant Programs
America’s Home Grant and Down Payment Grant are two grants Bank of America offers to help with down payments and closing costs. Up to $10,000 in down payment assistance is available through the Down Payment Grant, while up to $7,500 is available through America’s Home Grant. When you get your mortgage from Bank of America, you may face tax implications.
Chase Homebuyer Grant
A Chase Bank grant of up to $2,500 may be available if you buy a home in a census tract classified as “low to moderate income” by the government. Thousands of Black neighborhoods across the country also receive grants of up to $5,000. If your closing costs are higher than predicted, you may be able to use the funds toward your down payment instead (depending on how the costs come out). You can ask your loan officer whether you qualify based on where you live and your financial situation.
If you are a recovering alcoholic or drug addict looking for grants and programs that can help you get a roof over your head, read the Gov Relations article on government grants for sober living homes.