What Are First Time Home Buyer Programs And How Can They Help Me?

The average first time home buyer is often completely overwhelmed when they start to consider homeownership. A new home is likely the largest purchase most people will make in their lifetime. When you’re first starting out, you may experience some sticker shock. And a thirty-year mortgage sounds like an eternity. A home is both an investment and a place to enjoy every stage in your life. So, it definitely pays to do some research and find out how to purchase your first home with all the help that’s offered to make it easier.

What Makes You a First Time Home Buyer?

Technically, you are considered “first time home buyers” if you don’t currently own a home and haven’t for the last three years. You’re also a first time home buyer you’re recently divorced, and your previous home was co-owned with your ex-spouse.

So, some of these first-time owner resources can still help you purchase your next home. There are income requirements, and you may not be eligible to use them if you’re looking to buy a luxury home or a rental property. But if you’re low to middle income and haven’t owned a home by yourself recently, you may qualify for these special first time home buyer grants and loans.

First Time Home Buyer Programs

Local State and County Programs for Home Buyers

Your first-stop resource is homeownership programs at the state or county level. Many cities offer assistance to home buyers, as well. Home ownership doesn’t just allow you to build equity and wealth; it also builds equity and wealth in neighborhoods. Thus increasing property values, supporting local businesses, and creating a tax base to support schools and other public services.

Local programs often come with income requirements that allow low-income workers to invest in a stable home for themselves and their families. Some homebuyer programs may require the buyer to take a class. You can find out more about your local programs at the HUD (Housing and Urban Development) website.

HUD Good Neighbor Next Door Program

The HUD’s Good Neighbor Next Door program gives teachers, firefighters, police officers and EMTs the chance to get 50 percent off the price of their home when they purchase in a designated community tagged for revitalization. They may not be in the prime neighborhoods but are an affordable choice for public workers to get that starter home.

First Time Home Buyer Grants for Down Payment Assistance

Conventional wisdom states that a new homeowner needs 20 percent of the purchase price in ready cash to buy a home. Once you’ve looked at the homes for sale in your area, you’re probably wondering how anyone manages. Even in low-cost regions, the cost of a new home can run into six figures easy, which means a first time home buyer needs at least $20,000 to $40,000 in cash just to get started.

While most current homeowners roll over any profit from the sale of their previous home into the down payment for the next, a first time home buyer has trouble coming up with that much cash. However, there are down payment assistance programs to help, and some loans require very little to no cash down at all.

There are a handful of grants that new home buyers can use to get the cash in hand, and the best part is that grants are not loans, and don’t need to be paid back.

FHA Down Payment Grants

The Federal Housing Authority provides low-down-payment loans for those who might not otherwise be able to afford to purchase a home. They have a list of down payment grants on their site you can check to see if they’re available in your area.

National Homebuyers Fund Down Payment Grant

A down payment grant for first time home buyers from the National Homebuyers Fund provides up to 5 percent of your mortgage loan in a non-repayable grant. It’s great for low to moderate income buyers, and they will work with those with less than perfect credit. Even better, it’s not limited to first time home buyers.

VA Adapted Housing Grants

If you or a family member is a wounded veteran that requires an ADA adapted home, this grant may help. There are two types of VA adapted housing grants. The first, the Specially Adapted Housing Grant, available on a limited basis, helps service-disabled veterans purchased an adapted home. The second, the Special Housing Adaptation (SHA) grant, provides funds for adapting a current home. These grants are not limited to a first time home buyer, but might be something to consider if the situation applies. You can find out more from the Veterans Administration website.

First Time Home Buyer Loans

VA Loans

Veterans and certain surviving spouses may be eligible for the Veterans Administration home buyers program. The VA guarantees home loans and provides other programs that help you buy, build, repair, or adapt a home. Private lenders make the loans themselves, but the VA guarantees a significant portion of the loan, which means you get better financing terms. With a VA loan, you can purchase the home with no down payment, and because the loan is guaranteed, you won’t have to pay private mortgage insurance. You don’t have to have a certain credit score to qualify. This is a reusable benefit, which means if you sell your home, you can purchase your next one with a VA loan, too. However, these loans do require a rather high credit score.

Native American Direct Loan

The VA also has a direct loan for Native American Veterans. Started in 1992, this VA loan allows Native American Veterans to purchase Federal trust land. The VA provides a direct home loan to buy, construct, or improve homes on Federal Trust land as well as refinance an earlier loan at a better interest rate. There’s no down payment. The program boasts a low 4 percent interest rate and like the VA loan, is a reusable benefit.

FHA Loan for the First Time Home Buyer

The Federal Housing Authority, an agency within HUD, provides the majority of first time home buyer loans in the country. The FHA loan has been around since the Great Depression. The FHA helps guarantee the loan, similar to the VA loan, allowing home buyers more leeway when approaching a bank for funding. The down payment required can be as low as 3.5 percent. Credit standing is more flexible, too, which means that those with only fair credit can still get a decent interest rate. Those with a credit score over 580 can buy with a 3.5 percent down payment. Those with lower scores can buy with 10 percent down. Closing costs are low, too, so if you’re on a tight budget, the FHA loan might be your solution.

And for those who are thinking income property, the FHA will guarantee loans on properties with up to four units. Purchase a duplex and live on one side while renting the other helps pay the mortgage.

FHA Section 203(k) Loan

If you’re thinking of taking on a fixer-upper, the FHA 203(k) Loan will let you borrow the price of the home plus the cost of the rehab. Also guaranteed by the FHA, they consider the home’s value with the improvements, rather than the home as-is. You’ll be able to borrow the money for the rehab in one mortgage payment. The down payment for an FHA 203)(k) can even be as low as only 3 percent.

USDA Loans

Like the FHA, The U.S. Department of Agriculture also offers a guaranteed loan program for a first time home buyer willing to purchase their primary residence in designated rural areas. They aren’t all farmhouses and ranches, either. Many outer suburban housing developments are in USDA approved zones.

The program provides both repeat and first time home buyers with a 90 percent guarantee for their loan and you can often buy without a down payment. Buyers need to occupy the home and meet income limitations as well. Those with credit ratings of 640 or above will get fast processing, while those with below ratings may still be eligible, with backup documentation.

NACA Purchase Mortgage Program

The Neighborhood Assistance Corporation of America (“NACA“) is a non-profit organization that supports homeownership. They focus on both urban and rural areas with building strong communities at the top of their agenda. The program helps member purchase with no down payment and no closing costs and is friendly to those with poorer credit. They will also offer a better interest rate or modify a current loan with predatory rates.

HomeReady HomePath Mortgage

HomePath is a program offered by Fannie Mae and Freddie Mac. These government-sponsored agencies work with lenders to help first time home buyers, and others with low to moderate income, purchase homes. Fannie Mae and Freddie Mac offer loan guarantees to help buyers get good interest rates and down payments as low as 3 percent. Fannie Mae requires education through its “HomePath Ready Buyer” online program for first time home buyers to help them negotiate the sometimes confusing process.

Section 184 Guaranteed Loans

This program is specially designed for Native American and Alaskan native families and tribes. The program offers a low down payment, and the loan is available for properties both on and off native lands, as well as new construction.

With all of these fantastic first time home buyers programs, purchasing your first home is easier than you might think. These organizations want you to start building equity in your own future while helping develop stable communities. Take a look at these programs and grants and see if you qualify. Then talk to your mortgage broker, who may know of additional programs to help your reach your goal of homeownership.

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