Mortgage Blog

A Guide To First-Time Home Buyer Programs, Loans And Grants

September 30, 2023 | Posted by: Ben Cohen

Purchasing a home involves many considerations, and it's common for first-time buyers to have queries. You might be curious about tips for first-time homeowners, or how to secure assistance for down payments and closing fees.

In this guide, we'll delve into some beneficial grants, mortgages, and schemes tailored for first-time homeowners, ensuring you're aware of the available choices.

Overview of Programs for First-Time Homeowners

The expenses associated with buying a home for the first time can be daunting. Thankfully, there are multiple programs to aid with down payments and closing fees, including philanthropic initiatives and government-backed schemes. Both local and federal tax incentives can ease the financial burden, and there are educational resources to guide you throughout.

Assistance for Down Payments (DPA)

The initial down payment can be a significant outlay when purchasing a home. Thankfully, many financial institutions recognize DPAs, which can alleviate the initial costs.

DPA Loan Options

• Secondary mortgages, which are settled concurrently with your primary mortgage.
• Deferred payment loans, settled in full upon relocating, selling, refinancing, or clearing your primary mortgage.
• Loans with forgiveness clauses over a predetermined period. However, if you relocate, sell, refinance, or clear your primary mortgage before this period concludes, repayment is required.

DPA Grants

Grants for DPAs don't necessitate repayment. Each program's criteria can differ, so consulting local or state authorities for first-time buyer DPAs is advisable.

Loans Supported by the Government

Certain federal loans enable qualified first-time buyers to purchase without a down payment. We'll delve deeper into these shortly.

Tax Incentives

While the $7,500 credit from the Housing and Economic Recovery Act for first-time homeowners ceased in 2010, there are still tax-saving avenues. Deductions at both federal and state levels can reduce your taxable income. For instance, mortgage insurance costs for primary and secondary homes can be deducted if the mortgage value is below specific thresholds. Interest paid on loans up to certain limits can also be deducted, among other homeownership-related deductions.

Assistance with Closing Fees

Similar to DPAs, there are schemes to aid with closing fees, which are additional charges incurred at the mortgage's conclusion. These fees usually range from 2% to 6% of the total mortgage value. Assistance can be in the form of grants or loans. Sellers might also offer concessions to assist with closing costs.

Home Buying Education

Online resources and programs can guide you if you're unsure about initiating your home search. Comprehensive courses for first-time buyers can be affordable or even free.

Federal Programs for First-Time Buyers

Various federal, state, and local schemes are available for home purchases. Federal schemes are accessible to all U.S. citizens or legal residents. Here are some notable federal initiatives:

Government-Supported Loans

These loans, insured by the government, cater to those with minimal down payments or less-than-perfect credit scores. They typically come with lower interest rates. The three primary options are FHA, USDA, and VA loans.

Good Neighbor Next Door

This HUD-sponsored initiative offers a 50% discount on select properties for professionals like teachers, EMTs, firefighters, and police officers.

HomePath® Ready Buyer™ Program

Fannie Mae's program allows first-time buyers to purchase foreclosed properties with minimal down payments. They also offer potential reimbursements on closing costs.

State and Local Initiatives

Most assistance for home buying is channeled through state and local programs. The HUD website provides a comprehensive list of resources specific to each state.

Charitable and Nonprofit Programs

For those with moderate to low incomes, charitable and nonprofit organizations might offer assistance. Notable examples include Habitat for Humanity and the Neighborhood Assistance Corporation of America (NACA).

Employer-Backed Programs

Some employers offer housing incentives, including down payment and closing cost assistance. It's worth checking with your HR department.

Programs for Student Home Buyers

While student loans can complicate mortgage acquisition, standard first-time buyer programs remain applicable. Some states even have schemes tailored for student loan holders.

If you need further clarification or assistance, please don't hesitate to get in touch.

Back to Main Blog Page