Government Assistance Programs for First-Time Home Buyers

Deciding to be a home owner is a big leap itself. And a lot of first-time home buyers get overwhelmed of this feat. These hurdles are from saving for a down payment and qualifying for mortgage, to home buying and closing costs. A main barrier to homeownership is down payment, affordable housing, and access to credit. It takes time to save for a down payment and by the time you have saved enough, the home values have gone up. Government assistance programs for first-time home buyers help people reach their dreams of home owning.

How do I qualify as a first-time homebuyer?

First-time homebuyers is often someone who hasn’t owned a home in at least three years. People who may qualify as first-time home buyers are previous homeowners. This may include those who lost their homes in a crisis and are just now recovering.

To join a program, there are other qualifications to meet. This may need meeting the credit score requirements of the lender or the property meets certain standards. If you are unsure about a government program’s qualification requirements, ask your lender to explain to you.

What is a First-Time Home Buyer Program?

Federal, state, and local governments have first-time home buyer programs like home mortgage loans, down payment assistance, closing cost assistance, government tax deductions, home buyer education, and mortgage rate deductions.

Moreover, there are state and local governments that provide cash grants to qualified first-time home buyers.

Start exploring the housing finance agency in your state. Check your municipality’s website or reach out to a trusted real estate agent.

Government assistance programs for first-time buyer
FHA home loan

The FHA loan is the most well-known low down payment mortgage. This is popular for those who can’t afford the traditional 20% down payment. In addition, those who do not have perfect credit scores opt to use this. These loans have flexible underwriting standards.

VA home loan

The VA mortgages are backed by the the Department of Veterans Affairs. This is for the exclusive use of active-duty military members, veterans of the armed services, as well as the surviving spouses. This loan does not require down payment or monthly mortgage insurance. There is, however, a VA funding fee that you can roll into your mortgage to avoid paying it upfront. Other important information about this program is that you can’t use the VA loan to buy a vacation home or investment property.

USDA Home Loan

The USDA loan is backed by the U.S. Department of Housing and Urban Development that is ideal for borrowers with low incomes and are buying property in rural areas. To qualify, your household income must meet certain guidelines and that the home you will buy is eligible in the rural area.

Good Neighbor Next Door Program

Another government assistance program is the Good Neighbor Next Door Program that sells homes at half-price to full-time teachers, law enforcement officials, firefighters, and emergency medical technicians (EMTs). The 50% discount off the listing is available for the mentioned workers in exchange to committing to live in their home as a principal residence for at least thirty-six months. Note though that not all homes for sale are eligible for this program. Check with U.S. Department of Housing and Urban Development for additional requirements and eligibilities.

First-time home buyer education courses

It is helpful for first-time home buyers to take a home buyer education course. You can get these courses online or through government housing agencies like Freddie Mac and Fannie Mae. The HUD also has housing counselling agencies in every state that can help borrowers understand the process at no charge, if qualified.

Down payment assistance (DPA) and Closing Cost Assistance

National Homebuyers Fund (NHF) has a down payment assistance available in most U.S. states. The assistance can be used towards down payment or closing costs. The DPA is available up to 5% of the mortgage loan amount.

Government Tax credits

State and local governments may also offer you access to a mortgage credit certificate. This can reduce the amount of federal income tax you pay, making it possible for you to save more funds. The tax credits are usually designed for first-time home buyers but eligibility may vary depending on the state and locality.

Whichever from these government assistance programs you will take advantage of, it is always best to get your finances in order. Build up your savings, pay off your debts, etc. A healthy credit score informs lenders that you are a good candidate for a mortgage.

Also, don’t forget to get a mortgage pre-approval before you start house shopping. And rely on the experts such as your trusted real estate agent to guide you as you navigate the path towards home ownership.