April 17, 2021

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13 Best First-Time Homebuyer Programs

Kritchanut / Getty Images

Kritchanut / Getty Images

First time buyers are inexperienced and find themselves in a daunting process with a steep learning curve – but they also have a lot to offer. There are programs at both state and national levels that specifically help people get into their first homes. Some offer low interest rates, forgiving loan requirements, small down payments, or federal guarantees for lenders. Some are for veterans, low income shoppers, rural people, or first responders. However, all of them exist only to make buying your first home easier, more accessible, and more affordable.

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National first-time buyer programs

Some first-time buyer programs are financed by the federal government. Check out these nine offerings supported by the U.S. government to see if they meet your needs:

1. FHA loans

The Federal Housing Office guarantees loans that are issued by its approved lenders, reducing risk and lowering loan and down payment requirements. You must have a FICO score of at least 580 to apply for an FHA loan.

Consider these aspects of FHA loans:

  • FHA-insured loans require mortgage insurance.

  • Down payments can be up to 3.5 percent, depending on the balance, up to a maximum of 10 percent.

  • The credit limits vary depending on the location and the type of house you want.

  • You have to pay for a property appraisal and credit report.

  • The FHA defines what closing costs lenders can charge borrowers, but each local office sets the specific amounts that are deemed reasonable and customary.

2. USDA loans

U.S. Department of Agriculture loans are for low- and middle-income families in eligible rural areas. The program guarantees 90 percent of the loan, which largely reduces the lender’s risk.

To get a USDA loan, you must meet the following requirements:

  • Fall below the stated income thresholds

  • Occupy the apartment personally as your main residence

  • Be a U.S. citizen, a U.S. non-citizen, or a qualified alien

  • Buy a property that meets all of the program criteria

3. VA Loans

The Veterans Administration provides home purchase assistance to service members, veterans, and eligible surviving spouses nationwide. It guarantees part of a private lender mortgage, which usually translates into more favorable loan terms.

Here’s what you need to know about VA mortgages:

  • The loans are provided by private lenders such as banks and mortgage lenders.

  • You must complete a certificate of eligibility to apply.

  • You can use a VA loan to buy, build, repair, keep, or customize a home.

4. Good Neighbor Sales Program for Neighbors

The U.S. Department of Housing and Urban Development provides national home purchase assistance to law enforcement officers, qualified teachers, firefighters, and paramedics. If you qualify for this program, get a 50 percent discount off the list price of the home if you commit to living in it as your primary residence for 36 months.

Other requirements apply:

  • You must select a home in a revitalization area listed in the Good Neighbor Next Door Sales program.

  • You must meet the requirements to be a law enforcement officer, teacher, firefighter, or paramedic and adhere to the HUD program rules.

  • You’ll need to sign a second mortgage and note the discount amount. Provided you stay in the house for 36 months, you do not pay interest on this endorsement.

5. Fannie Mae Loans

Fannie Mae offers 3 percent down payment mortgages to help first time buyers. You can talk to your lender about the program and see if you meet the eligibility requirements.

You must meet certain criteria to qualify for the program, including the following:

  • At least one buyer must be a first-time buyer.

  • You are not buying a prefabricated house.

  • The house is a unit that includes townhouses.

  • You will have the house as your main residence.

  • You get a fixed rate mortgage.

  • You can use money received as a gift from a relative or as a grant for the down payment and closing costs.

  • You need to pay for private mortgage insurance if your down payment is less than 20 percent of the purchase price of the house.

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6. Freddie Mac Loans

Freddie Mac Home Potential Mortgages are designed to help first time buyers achieve the American Dream. The program meets the funding needs of low and middle income borrowers in need of low down payments and the ability to leverage flexible funding sources.

You may be interested in one of these loans if:

  • You live in an underserved area.

  • You are looking for reduced mortgage coverage for loan-to-value ratios greater than 90 percent.

  • You can afford to cut as little as 3 percent.

  • You want a fixed rate mortgage.

7. Energy efficient mortgage loan

An EEM is recognized nationwide and can be applied to most mortgages – and it credits a home’s energy efficiency in the mortgage itself. EEMs ​​allow you to finance energy-saving measures under a mortgage and stretch the debt-to-income ratio on loans for a better home. There are three types of EEMs available: Energy Star Affiliate Loans (Conventional Loans), VA Loans, and FHA Loans.

When you get an energy efficient mortgage, you can:

  • Enhance the comfort of your home.

  • Save money every month.

  • Increase the resale value of your home.

  • Sell ​​your home faster.

8. FHA 203k rehab loan

A FHA 203,000 loan is supported by the federal government and is available to buyers who wish Invest in a fixer upper home and renovate. For example, if you choose a home that needs a new bathroom and kitchen, an FHA 203k lender will give you enough money to both buy the home and do the renovations.

For example, a FHA 203,000 rehab loan covers plumbing improvements, heating and air conditioning repairs, and new sidings and additions. However, luxury enhancements like adding a pool or tennis court to your property are not covered.

Often times this loan includes:

  • Up to 20 percent “contingency reserve” so you have enough money to complete the remodel if it costs more than you estimated

  • Up to $ 35,000 was put on the mortgage for repairs or improvements

  • A provision that allows you to make mortgage payments for up to six months so that you can live elsewhere during the renovation and still pay your mortgage

  • Minimum deposit amounts and competitive interest rates

  • A difficult application process

  • Criteria for the qualification of a property

9. NADL program

The Native American Direct Loan Program offers eligible Native American veterans and their spouses the option to use a VA Home Loan Guarantee to purchase federal real estate at a reduced interest rate.

There is no down payment required with this loan and it can be relatively easy to qualify. Plus, you don’t have to pay a PMI.

Other characteristics of an NADL are:

  • Dedicated VA employees will be happy to help you

  • 2.75 percent initial interest rate

  • Low closing costs

  • Fixed rate 30 year mortgage

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State first-time buyer programs

Each state has its own programs designed to help first-time buyers. Learn about four different state-specific programs to see what types of programs may be available to you.

1. Texas SAHC Loans

Texas State Affordable Housing Corporation provides mortgage loans, down payment assistance grants, and mortgage loan certificates to first time home buyers. It offers two different types of programs: the Homes for Texas Heroes Home Loan Program and the Home Sweet Texas Home Loan Program.

The first program is specifically aimed at teachers, firefighters, rescue workers, police officers, law enforcement officers and veterans. The latter program is aimed at people with low to middle incomes.

Features of these loans include:

  • 3 to 5 percent down payment assistance that is considered a gift that you don’t have to repay

  • 30-year fixed-rate mortgage

  • No set time to stay home

  • You don’t have to be a first-time buyer

2. CalHFA Loans

The California Housing Finance Agency offers first-time home buyers and low- to middle-income families the opportunity to purchase homes, including low-interest down payment loans. They must be approved by a CalHFA approved lender who will determine how much you can borrow based on your gross income, current debt, new mortgage payment, and loan amount. Both government loans and conventional loans are available.

The loans have some requirements such as:

  • If this is your first time a home buyer, you will need to take a recognized homebuyer training course and present a certificate of completion.

  • You must live in the home you are buying for the life of the loan, or until it is sold or refinanced.

  • You must be a first time purchaser to be eligible for assistance.

3. SONYMA Achieve the dream program

The State of New York Mortgage Agency’s Achieving the Dream mortgage program is aimed at low-income first-time buyers. The program consists of a 30 year loan with lower interest rates that you can finance with One to four family houses.

Other functions of this program are:

  • A 30 year fixed rate FHA mortgage

  • No prepayment penalties for early mortgage repayment

  • Down payment assistance available up to $ 15,000

You need to have a job, good credit, and stick to income and purchase price limits.

Note that you must contribute 1 percent of the property’s value when buying a home and 3 percent when buying a cooperative.

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4. FHFC First Time Buyer Program

Florida Housing Finance Corporation’s first-time homebuyer program offers 30 year fixed rate loans through participating lenders. And even if you’re not a first-time buyer, if you are buying a home in a federally designated destination or are a qualified veteran, you may still be able to take advantage of the program.

Further details of the program are:

  • You must complete a homebuyer training course.

  • Your FICO score must be at least 640.

  • You may be able to join one of Florida Housing’s second mortgage programs to support your down payment and closing costs.

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Andrew Lisa contributed to the reporting for this article.

Last updated: March 26, 2021

This article originally appeared on GOBankingRates.com:: 13 best first-time buyer programs