If you would like to become a homeowner but the pandemic has affected your cash flow – or if you can’t save enough for a down payment – there are a number of grants and aid programs available to help finance your first home.
In the midst of the COVID crisis, a number of homebuyer assistance programs have even been expanded by housing agencies, banks and other institutions in recent months.
And depending on where you live, what you do for a living and Your credit scoreYou may qualify for a low or no down payment loan.
Paying a deposit can be daunting for beginners
For many of us, buying a home is the biggest financial transaction we will ever make. Although most people will fund the bulk of a home purchase, they will still require thousands of dollars in upfront costs.
A deposit is usually the largest piece of cash you will need. The median down payment for all homebuyers in 2020 was 12% of the purchase price of a home, according to the National Association of Realtors. For first-time buyers it was 7%.
You could save and invest to make that money – maybe with the help of a popular app to help you out Grow your “spare money” – but you will likely need some help raising enough money.
If you are a first-time buyer in need of a financial boost, there are numerous options available.
Despite COVID, public authorities are still handing out dollars
Every state has one Real estate finance agency with various programs for people who are buying their first homes. Cities, counties, and other entities also sponsor down payment grants or low-interest loans for new buyers.
If you are unsure whether a program is available in your area, contact a Real estate agent or mortgage loan officer, or contact your state’s housing agency.
While some home assistance programs have been suspended due to the pandemic, the majority are still widespread, according to Down Payment Resource, which tracks approximately 2,400 home ownership programs.
Some agencies have even launched new programs to help first time buyers as property prices have risen across the country due to the low supply of homes for sale and increasing demand.
For example, in northeast Oregon a First-time purchaser program for military veterans Launched last summer, the offering offers up to $ 15,000 in down payment and closing costs if a homeowner stays in the home for at least five years.
Big banks offer big savings
Many banks have homebuyer assistance programs aimed at low- and middle-income borrowers, and some are expanding their offerings.
Bank of America recently announced By 2025, funding for the Community Homeownership Commitment Program tripled to $ 15 billion.
The program offers eligible borrowers up to $ 10,000 down payment grants and up to $ 7,500 in lender loans that can be used for closing expenses including property insurance and related fees. No repayment is required.
“It can be difficult to save enough to buy a home, so it’s not surprising that we’ve had an overwhelmingly positive response to our programs,” said D. Steve Boland, president of retail at Bank of America. in the announcement.
Meanwhile, Chase Home Lending offers one $ 5,000 in grants To help borrowers with down payments and closing costs in certain communities. This is an extension of an existing program that focuses on increasing home ownership among Black and Hispanic populations.
An additional $ 500 is available for some borrowers taking a certification course.
Inexpensive option for new buyers: FHA mortgages
For decades FHA loanThe company insured by the Federal Housing Administration was the first choice for first-time buyers due to the loose credit standards and low down payment requirements of the program.
These popular loans allow down payments of as little as 3% of the purchase price of a home. And the interest rates on FHA loans tend to be even lower than that historically low mortgage rates on today’s typical home loans.
However, the FHA requires borrowers to pay a mortgage insurance premium (MIP), which can be substantial. Regardless of your down payment amount, you pay a 1.75% upfront fee and then up to 1.05% of your loan amount each year.
If you pay a deposit of at least 10%, the annual MEP can be removed after 11 years. However, if you lower less than 10%, your MIP will never be lost.
Insurance protects the lender if something goes wrong and you cannot make your payments.
Other good loans for first time buyers
Your job can qualify you for housing assistance.
Police officers, teachers, firefighters and paramedics can take advantage of the benefits Good Neighbor Next Door program run by the US Department of Housing and Urban Development (HUD).
This community revitalization program provides an incentive in the form of a 50% discount off the list price of an eligible home. In return, the borrower must have lived in the property for at least three years.
If you’re a member of the U.S. military or a veteran, you can qualify for one VA loans with no down payment supported by the US Department of Veterans Affairs.
USDA loans guaranteed by the U.S. Department of Agriculture also do not require down payments. They are available in rural and some suburbs, and lower credit scores are accepted than traditional loans.
So how do you get housing assistance?
In order to use these programs, you must first qualify.
Depending on the program, borrowers must meet certain income, credit score, and geographic requirements. If you’re not sure where your score is, it’s very easy to do today Check out your credit score for free.
Shad Bogany, a longtime Houston real estate agent, warns that securing home buyers has taken longer as the pandemic disrupted work patterns across agencies and programs.
“It seems like it takes longer to process,” he says, “because a lot of people work from home.”