Don’t be daunted by the thought of homeownership! There are plenty of great programs to make buying a home affordable, even if you’ve never owned one before. First-time homebuyers may not have to sweat about a 20% down payment, a less-than-stellar credit score, or incomes that fall in the low to moderate range. And even if you have owned a home before, you may still be eligible for first-timer programs! Read on to learn more.
Are you a first-time homebuyer?
The U.S. Department of Housing and Urban Development (HUD) determines who is considered a first-time homebuyer. Even if you’ve owned a home in the past, you may still qualify. HUD says you’re a first-timer if you meet any of these criteria:
- You and/or your spouse have not owned a principal residence in the past three years.
- You’re a single parent or displaced homemaker whose only previous homeownership was with a former spouse.
- You’ve only owned a principal residence that did not have a permanent foundation, like a mobile home.
- You previously owned a home, but it was not in compliance with state, local or model building codes, and that property cannot be brought into compliance for less than the cost of constructing a permanent structure.
If this sounds like you, let’s talk loan programs!
If you qualify as a first-time homebuyer, the following mortgage assistance programs can help get you into your new home and save you money in the process.
Insured by the Federal Housing Administration, an FHA loan is best suited to first-time homebuyers who may have lower credit scores or smaller amounts saved for a down payment. You may qualify for an FHA loan with a down payment as low as 3.5 percent of the amount you need to borrow. Weaker credit history doesn’t have to mean a higher interest rate: FHA loan interest rates can dip considerably lower than the rates for traditional loans.
Backed by the U.S. Department of Veteran Affairs, VA Loans require little-to-no down payment for qualifying military personnel, veterans, and their families. VA Loans typically offer lower interest rates than their conventional counterparts. To qualify, you must be a veteran or active-duty service member with at least 90 days of continuous service, a National Guard or Reserve member for at least six years, or a surviving spouse, who has not remarried, of a veteran who has died in the line of duty or from a service-related incident.
Native American Direct loan:
Also backed by the U.S. Department of Veteran Affairs, the NADL program makes home loans available to eligible Native American veterans to buy or build a home on federal trust land. Like with VA loans, little to no down payment is required, and you can expect little to no closing costs. This loan is also open to veterans who are married to a Native American non-veteran.
Guaranteed by the U.S. Department of Agriculture, the USDA loan program is strictly for lower-income borrowers looking to buy a home in a rural area of the country (in some states, suburban areas may also be included). These loans typically carry low-interest rates and may not require a down payment, but to qualify your household income must not exceed 115% of the median income for the area you’re looking to buy in.
Fannie Mae and Freddie Mac:
Considered a conventional loan, a Fannie Mae or Freddie Mac loan is probably the go-to program for first-time homebuyers with good credit and a stable job but with little saved for a down payment. That’s because both programs allow financing for as much as 97% of a home’s price, so down payments can be as low as 3%. You’ll need a minimum credit score of 620 and a near spotless credit history to qualify. But if you’re planning to stay in your home longer, it’s a great mortgage option: once your home equity reaches 20%, you may also be able to cancel the required mortgage insurance.
Home renovation loan:
Having difficulty getting approved for a loan on a place that needs improvement? A home renovation loan may help. Backed by Fannie Mae, the single loan will include the money for the primary mortgage to cover the home purchase plus funds to cover a renovation budgeted for at least $5,000.
Similarly, there is a relatively new loan from the Federal Housing Administration that helps first-time homebuyers plan for long term savings on their utility bills. The energy-efficient mortgage enables borrowers to finance energy-efficient improvements with their mortgage, which in turn makes the home more affordable overall.
Good Neighbor Next Door Program:
Good news for police officers, firefighters, emergency medical technicians, elementary through high school teachers, and other public servants! The Good Neighbor Next Door buyer aid program encourages them to become homeowners in “revitalization areas” as designated by HUD. Applicants can receive up to 50% off the list price for homes in these areas with low down payments and no application fees. But there is a catch: you must agree to live in these homes as a primary residence for at least three years.
These are just some of the many federal programs available. Many U.S. states and cities also offer first-time buyer programs and grants for a down payment, financing, and closing cost assistance. Contact your local Movement Mortgage loan officer to discuss which program might be right for you.