Buying a home for the first time – or the first time in a long time – can be an intimidating prospect. For one thing, it’s a big expense. Luckily, there are lots of first-time homebuyer programs out there to help ease the financial burden a little. To that end, I’ve laid out a primer on these programs, as well as detailed some of the most common ones and explained how to access them. Keep reading to learn how you can utilize first-time homebuyer programs can help you become a homeowner.
Who is a first-time homebuyer?
At first glance, the term “first-time homebuyer” might seem self-explanatory, but in the real estate world, this term is broader than one might expect. Usually, in addition to catering to buyers who have never purchased a home before, most programs also extend to returning buyers who have not purchased a home within the last few years.
The buyer requirements are different for each program, so you’ll need to do your own research to see if you qualify. However, it’s important to know that being a current homeowner or having been one in the past doesn’t automatically disqualify you from accessing these benefits.
National programs
FHA:
The Federal Housing Administration (FHA) offers a mortgage program that allows first-time homebuyers – as well as those who have not purchased a home in the last three years – the opportunity to purchase a home for as little as 3.5% down, provided that they have a credit score of at least 580. The one caveat with this loan is that you must carry mortgage insurance over the life of the loan, as opposed to a conventional loan set up, where you can get rid of your PMI requirement when you pay down at least 20% of the loan.
USDA:
The United States Department of Agriculture (USDA) issues low-interest loans to low-income buyers who are looking to live in rural areas. The USDA offers two types of loans to first-time homebuyers, a USDA guaranteed loan and a USDA direct loan. With the guaranteed loan, the government will back your loan provided that you don’t make more than 115% of the median income for the area where you intend to live. For lower-income buyers, the USDA will fund the loan itself through the direct loan program.
VA:
VA loans are backed by the Veterans Administration (VA) and are offered to active service members, veterans, and their families. To qualify for one of these loans, you need to meet certain service requirements. However, for qualified individuals, these loans allow you to purchase a home with no money down. The program also has no official credit score requirement. All applications are reviewed on a case-by-case basis.
Good Neighbor Next Door:
Originally known as the Teacher Next Door program, this program is run by the Department of Housing and Urban Development (HUD) and has expanded to include police officers, firefighters, and emergency medical personnel. It offers qualified individuals the chance to get up to 50% off certain homes in “revitalization areas”, provided that you agree to live in the home for at least three years.
State and local programs
Beyond those nationwide loan programs, first-time homebuyers can also access help at the state and local level that can make purchasing a home even easier. Usually, these state and local programs come in the form of down payment assistance, closing cost assistance, or tax credits.
Since these programs are offered on a more local level, you’ll need to do your own research to see which ones are available to you when you’re ready to buy. That said, your best bet is to go through a qualified lender in your area. He or she will be able to take an in-depth look at your financials in order to determine what sort of assistance might be most appropriate for you.