First Time Homebuyer? – These Programs Are for You

Amber Kodad |

Do you fantasize about one day owning a home but don’t think you’ll ever be able to afford it? Do you wonder how you’ll ever come up with the down payment needed to purchase a home or how you’ll ever be able to get a loan with your low credit score?

If you do, then we have good news for you!! The American dream of owning a home is not just for the wealthy, there are a number of first-time homebuyer programs available to help make your dreams of homeownership a reality! These programs help people get low-interest mortgages when they can’t obtain them anywhere else, and since most of these programs are backed by government organizations, qualification requirements are a lot less strict than the traditional (conventional) loans.

FHA Loans (Federal Housing Administration)

  • Secure a loan with a down payment as low as 3.5% of the purchase price of the home with a credit score as low as 580 (down payments for conventional mortgages are usually 20%)
  • Gone through a bankruptcy in the past?! No problem obtaining an FHA loan as long as 2 years have passed
  • Usually provide considerably lower interest rates than traditional loans
  • Requires borrowers to pay mortgage insurance premiums usually upfront and on a monthly basis to protect the lender from defaults

Conventional 97% LTV Program – (Wait I thought you needed 10-20% down for conventional loans?!)

  • Requires a down payment of just 3% (.5% lower than FHA loans!)
  • More stringent requirements (minimum credit score of 620 and one of the borrowers must not have owned a house in the past 36 months)
  • Requires borrowers to pay mortgage insurance premiums to protect the lender in case of defaults

USDA Loans (United States Department of Agriculture)

  • Issues low-interest-rate mortgages to low-moderate income earners who wish to live in “rural areas” (the word rural is definitely broadly defined!)
  • Must make less than 115% of the median income for the area in which you live to qualify
  • Secure a loan with a low to NO down payment with a credit score of 680 or above
  • Requires borrowers to pay mortgage insurance premiums to protect the lender in case of defaults

VA Loans (Department of Veterans Affairs) – For our current and formal military members!

  • Requires no down payment and usually provides considerably lower interest rates than traditional loans
  • Does not require borrowers to pay mortgage insurance and carries no prepayment penalty
  • Upfront funding fee is required (1.25-2.25%) unless you meet requirements for disabled veteran status

NADL – Native American Direct Loans

  • A VA backed loan for homes on Federal Trust Land and VA sets the interest rates on the loans
  • Must be Native American and enrolled in an American Indian Tribe or Alaskan Native Village
  • Have to apply for VA home loan Certificate of Eligibility to qualify

HUD Programs – U.S. Department of Housing and Urban Development

  • Good Neighbor Next Door – provides 50% off homes for teachers, firefighters, and police officers
  • HUD Dollar Home Program – sells previously foreclosed homes for $1 to local governments, faith-based organizations, and nonprofits to help low-income families find affordable housing.
  • State and Local Programs
  • Most states also provide their own first-time homeowner programs. Make sure you check what programs are available through your state before purchasing a home!!

As always, please reach out to your trusted advisor with any questions.