A Guide To First-Time Home Buyer Programs, Loans, And Grants

A Guide To First-Time Home Buyer Programs, Loans, And Grants

First-time home buyers have a wealth of resources available to them to make the process more affordable and accessible. If you’re a first-time home buyer looking for helpful programs, loans, and grants to take advantage of as you step into your local market, use this guide to explore each of your options.

Types of first-time home buyer programs

One of the main concerns of many first-time buyers is ensuring they can come up with the funds necessary to invest in their dream property. It can be difficult to know where to begin when you haven’t purchased a home before, but fortunately, there are several helpful programs available that can make this part of the process much easier.

Down Payment Assistance (DPA)

Down Payment Assistance (DPA) programs are one of the best resources for any first-time home buyer, as they provide financial assistance through loans and grants. If you’re hoping to invest in a home in the coming year but aren’t sure how to meet the minimum down payment, make sure you stay aware of the different DPA opportunities in your area.

DPA loans

DPA loans are a great option, as they come with low-interest rates and flexible repayment terms. In most cases, these loans need to be repaid over a set period, usually between 10-30 years, but that can vary depending on the program.

DPA grants

DPA grants are similar to loans, but they don’t need to be repaid, making them an excellent option for homebuyers who need financial assistance but don't want to take on more debt. Buyers can often put these grants toward their down payment or closing costs, and, like DPA loans, they typically require buyers to meet specific eligibility requirements.

Government-backed loans

Government-backed loans are another strong option. These are mortgages that are insured by the government, meaning they’re less risky for lenders and more accessible for buyers. Some common government-backed loans include FHA loans, VA loans, and USDA loans, which will be explored in more depth below.

Tax deductions

First-time home buyers should stay aware of the various tax deductions they may be eligible for as well, from mortgage interest and property taxes to mortgage points. These deductions can help lower the overall cost of homeownership and increase tax savings.

Closing assistance

Many first-time home buyer programs also offer closing assistance, which can help cover the cost of closing fees and other expenses associated with buying a home. Closing costs can run as high as 11% of the total cost of a home, adding a significant amount to a buyer’s overall payment. Closing assistance can therefore be an incredible help in alleviating some of the extra financial weight first-time buyers feel when investing.

Home buyer education

Buyers should keep in mind that some programs will require them to complete educational classes regarding the home buying process. Learning about budgeting, credit scores, mortgage financing, and home care helps to show home buyer programs that a buyer is serious about investing and knows what to expect as they take their first steps.

Federal first-time home buyer programs

Federal programs can be a great option for buyers who work in certain professions or for those who are looking for more affordable homeownership options. By leaning on these programs, buyers can more easily achieve their dream of homeownership and enjoy the benefits that come along with it.

Government-backed loans

As mentioned above, the federal government offers several loans for first-time home buyers. FHA loans, VA loans, and USDA loans offer lower down payment requirements and more flexible credit score requirements than traditional mortgages, making them the perfect match for any first-time buyer. FHA loans, for instance, only require a 3.5% down payment and allow for credit scores under 620, while VA loans offer zero down payment and require no mortgage insurance for active duty or retired military.

Good Neighbor Next Door

The Good Neighbor Next Door program is a unique offering, also backed by the government, that offers homes at a 50% discount. The program is open to teachers, police officers, firefighters, and emergency medical technicians and aims to promote homeownership and encourage community development in areas that need revitalization. To be considered for the program, buyers must commit to using the home as their primary residence for at least three years.

State and local first-time home buyer programs

Buyers can apply for state and local programs as well, with options like the California Housing Finance Agency’s (CalHFA) first mortgage program and the MyHome Assistance Program being strong options for those on the West Coast. Local programs will vary by county and city, but options like the San Francisco Mayor's Office of Housing and Community Development's Down Payment Assistance Loan Program are ones to consider.

Employer-sponsored first-time home buyer programs

Buyers should always check with their employers before stepping into the buying process, too, as some companies offer first-time home buyer programs as part of their benefits package. Buyers may be eligible for down payment assistance or homebuyer education courses, while others might be able to sign on for a savings match program where their employers match funds from the employee’s down payment savings account.

First-time home buyer loans and grants for students

Students and recent graduates can often find low-interest loans or grants to help cover down payment or closing costs, or special financing options for those with limited credit history or income. It’s worthwhile to look into, as some universities and colleges have partnerships with local lenders to provide special financing and down payment assistance for their students.

First-time home buyer program FAQs

If you're considering buying your first home, what programs are going to offer the best help to you? Let’s explore some of the most common questions first-time buyers ask.

What is a first-time home buyer?

It may seem obvious, but a first-time home buyer is actually defined as someone who has not owned a home in the past three years. So while someone who is buying a home for the first time qualifies, so do individuals and families who have owned a home before.

Who qualifies for first-time home buyer programs?

Programs may define first-time buyers differently, so it’s always wise to check on the eligibility requirements before applying. Some programs may have income limits, while others may have specific requirements for debt-to-income ratios or employment history. Some programs may only be available in certain counties while others may not be open to buyers who work outside of a designated profession.

The bottom line: Help is available for those buying a home for the first time

With the help of first-time home buyer programs, loans, and grants, homeownership can be much more affordable and accessible. If you’re interested in learning more about how to invest this year, reach out to Boutique Real Estate to get started.

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