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First-Time Home Buyer Loan & Programs - Guide

Guide to First-Time Home Buyer Loan & Programs

If you’re reading this right now, I would like to congratulate you! You are one step closer to getting the new home that you have worked so hard for. But of course, the job is far from done. Buying your first home may be a fulfilling milestone, but it is not just as easy as purchasing an item with a credit card. It involves plenty of research, time, effort, and, most of all, patience.

You are probably at the stage of researching the processes of buying and financing a home. And it is probably the most intimidating part of your home buying journey. We are here to show you that it is not that terrifying. This guide aims to feature options that first-time homebuyers have regarding home loans and programs out there in the market.

You need to note that new buyers like you are entitled to special benefits, which encourage first-time homebuyers to get into the real estate market. On top of that, you may also get help from state and local programs, federal loans, and even tax breaks.

Before we get into the nitty-gritty, let us define what a first-time homebuyer is.

Who are the first-time homebuyers?

According to the U.S. Department of Housing and Urban Development, a first-time homebuyer is an individual who meets the following criteria:

  • An individual who has not held ownership of a principal residence for three years.
  • For couples, if you have owned a home but your spouse has not, both spouses are considered first-time home buyers.
  • A single parent who has only owned a home with a former spouse while married.
  • A displaced homemaker who has only owned a home with a spouse.
  • An individual who has only owned a principal residence not permanently affixed to a permanent foundation following applicable regulations.
  • An individual who has only owned property, not in compliance with state, local, or model building codes, cannot be brought into compliance for less than the cost of constructing a permanent structure.

Once you qualify as a first-time homebuyer, you will have access to loans and programs offered through the Federal Housing Administration (FHA).

Types of First-Time Home Buyer Programs

Now that we know what a first-time homebuyer is let us look at what programs are there to help you purchase your first home.

There are various first-time home buyer loans and programs that can assist you with your down payment and closing costs. These include federal, state, or local government-sponsored programs as well as charitable or non-profit assistance.  While local and federal tax credits are also helpful, you may also take advantage of educational programs that could help you in every step of your home buying journey.

First, let us tackle the most common problem a first-time homebuyer faces, the down payment. This is the initial payment you need to make when you buy a home. In most cases, a down payment is required to get a mortgage.

Down Payment Assistance

Down Payment Assistance

Many first-time homebuyers believe that you will need to at least give a pretty hefty down payment to get a mortgage. That is not always the case; various lenders offer as low as a 3% down payment.

Now, if you feel that the down payment is too high for you to cover, you may also avail of the different types of down payment assistance (DPA) loans to help you lower the initial payment you need to cover. Second mortgages, and deferred payment loans, are some examples of DPA loan programs you can take advantage of.

A second mortgage is a type of loan used when a buyer can’t afford to make the down payment required by the main mortgage. When using this as down payment assistance, you must pay off your second mortgage simultaneously as your main mortgage.

On the other hand, deferred payment loans are loans that can be deferred to a certain period of time. The loan must be paid in full whenever you move, sell, refinance, or pay off your main mortgage.

There are also some DPA grants you can avail of. These grants do not have to be repaid. Many program requirements differ per area; that’s why it’s always better to check with your local or state government regarding the details for these types of assistance programs.

Tax Credits

A tax credit is also another helpful way to save money for your first home. Additional deductions may be available in your area, and it’s always best to check with your local or state government regarding these possible deductions.

Closing Cost Assistance

Closing costs are expenses that are outside the property’s price. These include loan origination fees, appraisal fees, credit report charges, taxes, and many more.

There are many governments and private programs that can help you through their closing costs assistance programs. Similar to down payment assistance, closing cost assistance could come from a grant or a loan.

You may also look to your seller to contribute to these costs as well. This is called seller concessions. It is an arrangement wherein your seller agrees to pay specific closing costs or a percentage of the total closing cost.

Home Buyer Education

Time to put on your learning caps! Lucky you, there are many free and low-priced online educational programs that you can look for to help with your first home search. With these programs, you can learn more about the real estate processes, loan options, buying process, and even how to apply for a mortgage.

Federal First-Time Home Buyer Programs

Federal First-Time Home Buyer Programs

You may also avail of federal, state, and local government programs. Any citizen or legal resident of the U.S. may take advantage of these programs, although not every first-time homebuyer may qualify for every loan program.

Government-Backed Loans

Currently, there are three government-backed loan options: FHA loan, USDA loan, and VA loan. These loans may permit you to get a home with a low down payment or even a poor credit score. These lenders can also provide a lower interest rate.

Good Neighbor Next Door

The Department of Housing and Urban Development sponsors the Good Neighbor Next Door program for  pre-K-12 teachers, emergency medical technicians, firefighters, and law enforcement officers.

If you are in one of those professions, then you’re in luck! The program offers 50% off select properties.

HomePath Ready Buyer Program

Are foreclosed properties part of your home search? The mortgage loan company Fannie Mae offers first-time homebuyers a chance to purchase a foreclosed property for as little as a 3% down payment.

You do have to note that the HomePath Ready Buyer Program is only for first-time buyers who plan to live full-time in the home they are looking to purchase.

State And Local First-Time Home Buyer Programs

These programs also provide loans and home buyers assistance, but these programs will differ depending on your location. Best to check with your state or area regarding these buying resources.

Charitable Or Non-profit First-Time Home Buyer Programs

If you have low to moderate income, you may qualify for these programs. Non-government organizations may offer different resources for first-time homebuyers.

Habitat For Humanity

Habitat for Humanity is a non-profit organization working in more than 1,300 communities in the U.S. Volunteers around the country build these homes for families in need, making their homes very affordable compared to other local options.

Neighborhood Assistance Corporation of America (NACA)

If you have a low-income or poor credit history, NACA is a non-profit organization that could help you purchase your first home. They offer mortgage counseling, education and even help low-income families look for a mortgage lender to assist them in looking for a new home.

Employer-Sponsored First-Time Home Buyer Programs

Some employers in the United States can help you with purchasing your first home. Many employers are now looking into housing incentives as part of their benefits to help their employees with their down payments and closing costs.

It’s always best to check with your employers to see what they can offer.

Any loan or a program you find interesting?

Searching for a new home for the first time is a long process. So take your time to research and look for the right loan or program that you qualify for. There are so many loan and assistance programs that a first-time homebuyer could take advantage of, which makes the experience of buying a home so much more exciting!

Whether it’s a private home loan, a grant, or a local government-assisted one, always remember to choose the program that fits you and your needs.

Good luck with your home buying journey. Happy hunting!


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