October 15th, 2017 10:58 AM by Jackie A. Graves, President
Buying your very first home can be
overwhelming. There’s all the financial jargon and the mountainous mortgage
paperwork, not to mention the dollar amounts that can make you dizzy.
Money issues often stand in the way of
homeownership. A survey by rental service Apartment
List found that 80 percent of millennial renters want to buy a
home, but most say they can’t afford to.
What you may not realize is that many
first-time homebuyer programs and grants offer financial help, and you may be
eligible for various types of assistance.
Here are nine first-time homebuyer
programs and grants designed to help you land a
great mortgage and get a place of your own.
1. FHA loan
In an FHA loan, the Federal Housing
Administration insures the mortgage. The FHA is an agency within the U.S.
Department of Housing and Urban Development (HUD).
The FHA’s backing offers lenders a layer of
protection, meaning that your lender won’t experience a loss if you default on
FHA loans typically come with competitive
interest rates, smaller down payments and lower closing costs than
If you have a credit score of 580 or higher,
you could be eligible for a mortgage with a down payment as low as 3.5 percent
of the purchase price. If your credit score is lower than 580, you still might
qualify for an FHA mortgage, but the down payment would be at least 10 percent
of the purchase amount.
2. USDA loan
While not well known, the U.S. Department of
Agriculture (USDA) has a homebuyer assistance program.
While the program focuses on homes in certain
rural areas, you don’t need to buy or run a farm to be eligible.
The USDA guarantees the home loan. There may
be no down payment required, and the loan payments are fixed.
Applicants with a credit score of 640 or
higher typically get streamlined processing. With a credit score below 640, you
still can qualify for a USDA loan, but the lender will ask for extra
documentation about your payment history.
Keep in mind that there are income
limitations, which can vary by region.
3. VA loan
The U.S. Department of Veterans Affairs (VA)
helps active-duty military members, veterans and surviving spouses buy homes.
The VA guarantees part of the loan, making it
possible for lenders to offer some special features. VA loans come with competitive interest
rates and require no down payment. You aren’t required to pay for private mortgage insurance (PMI), and a
minimum credit score isn’t needed for eligibility.
If it becomes difficult to make payments on
the mortgage, the VA can negotiate with the lender on your behalf.
4. Good Neighbor Next Door
The Good Neighbor Next Door program,
sponsored by HUD, provides housing aid for law enforcement officers,
firefighters, emergency medical technicians and pre-kindergarten through
Through this program, you can receive a
discount of 50 percent on a home’s listed price in regions known as
Using the program’s website, you can search for
properties available in your state. You must commit to living in the home for
at least 36 months.
5. Fannie Mae or Freddie Mac
Fannie Mae and Freddie Mac are
government-sponsored entities. They work with local lenders to offer mortgage
options that benefit low- and moderate-income families.
With the backing of Fannie Mae and Freddie Mac,
lenders can offer competitive interest rates and accept down payments as low as
3 percent of the purchase price.
Fannie Mae also provides homeownership
education for first-time homebuyers through its “HomePath Ready Buyer” program.
6. Energy-efficient mortgage (EEM)
An energy-efficient, or “green,” mortgage is
designed to help you add improvements to your home to make it more
environmentally friendly. The federal government supports EEM loans by insuring them through the
FHA or VA programs.
The key advantage of this mortgage is that it
lets you create an energy-efficient home without having to make a larger down
payment. The extra cost is rolled into your primary loan.
Some improvements you can make include
installing double-paned windows, new insulation or a modern heating-and-cooling
7. FHA Section 203(k)
If you’ve run the numbers to see how much house you can affordand have
determined a fixer-upper is best for your budget, the Section 203(k) rehabilitation program may
be a good fit.
This type of loan, backed by the FHA, takes
into consideration the value of the residence after improvements have been
made. It then lets you borrow the funds you’ll need to carry out the project
and includes them in your main mortgage.
The down payment for a 203(k) loan can
be as low as 3 percent.
8. Native American Direct Loan
Since 1992, the Native American Veteran Direct Loan program
has helped Native American veterans and their spouses buy homes on federal
trust lands. The VA serves as the lender.
If you’re eligible, you won’t be required to
make a down payment or pay for private mortgage insurance (PMI).
This first-time homebuyer loan also offers low
closing costs and a 30-year fixed-rate mortgage.
9. Local grants and programs
In addition to the various programs provided
by the federal government, many states and cities offer
help to first-time homebuyers.
Before buying a home, check your state’s or
community’s website for information on housing grants and programs available in
You also might consider contacting a real estate agent
or local HUD-approved housing counseling
agency to learn more about programs in your area that might
apply to your situation.
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