It can be a struggle as a first-time homebuyer to gather enough money for a down payment on a home. If you’re a millennial first-time homebuyer, you may want to consider getting help with your down payment. While there are many things you need to know as a first time home buyer, one of the first steps is making sure your finances are in order for the purchase. It’s easy to find out if a down payment assistance program is right for you.
Who Qualifies for Down Payment Assistance Programs?
Many of these programs are geared towards those individuals who have never owned a home before, but some of them consider someone who hasn’t owned a property in over three years eligible. This can vary among the programs, so be sure to double-check their requirements if you have owned a home before.
Some programs are occupation-specific. Certain programs target teachers, first responders, police officers, or city employees. There are many local programs available to a variety of needs and careers.
Each program will have its own requirements for approval, but likely they will include:
- An income range. Many of these programs are for moderate to low-income households.
- You will also need a good to excellent credit score.
- The home must be in an approved community.
- You will have to enroll and take a homebuyer course, educating you on your responsibilities as a homeowner.
- Purchase a home within your set budget, as discussed with the program.
- You will have some money to contribute to the down payment.
How Do the Programs Work?
A down payment assistance program is typically run through finance agencies that are run by the state. There are also government programs through cities and counties. Their goal is to make housing attainable for everyone. These programs are often combined with first-time homebuyer-specific mortgages.
There are a couple of different options for assistance:
Grants: There are programs available that provide the funds for a downpayment as a gift, and it does not need to be repaid at any time.
Low-Interest Loans: Low-interest loans need to be paid back over a set term, typically around ten years or so. The long length of the term and the low-interest rate intend to make it an ideal solution for many home buyers, without making it too expensive to borrow money.
Zero-Interest Loans: There are two types of zero-interest loans, which are forgivable and deferred payment. Forgivable loans mean that after a certain amount of time, the loan doesn’t need to be repaid, as long as the homeowner still lives in the property. Deferred-payment loans vary among lenders, but this type of loan stays outstanding until the home is sold or the mortgage ends.
How do you Apply?
First, you will need to do some research. Find out the programs offered by your specific state and see what they entail. There will probably be many local options, so try and figure out which program type works best for you and your situation.
Look into the programs and grants that your city or county offers. Many grants are not well-known, so they often go unused. Take advantage of that and apply for as many as you can find.
If you find a program that interests you, or you feel it is the best fit for you, find out the requirements you’ll need, the process, and reach out to one of the approved mortgage lenders.
Apply for your mortgage through the approved lender. Often, the city or local agency can refer you to someone who has experience dealing with this type of program, which will make the process smoother for you.
What are Some of the Available Programs?
Here are some of the most popular programs available today:
- Local programs: Many states across the country offer assistance programs. Sometimes this includes low-interest loans or helps with the closing costs.
- A USDA loan: The US Department of Agriculture that is 100% guaranteed for those looking to purchase in rural areas.
- FHA Section 203(k) loan program: This program allows you to borrow funds to make improvements to your property and have it rolled into your mortgage.
- Federal Housing Administration loan program: The FHA offers this loan, and it’s perfect for those who don’t have a high credit score, but they do have a little bit saved for their down payment.
- US Department of Veterans Affairs loan program: The VA loan program is specifically geared for veterans, military personnel, and their families.
- Native American direct loan: This program is backed by the VA, and it’s available for Native American veterans to purchase, renovate, or construct a new home specifically on federal trust land.
- Energy-Efficient mortgage program: This loan allows homebuyers to purchase energy-efficient upgrades and roll it into their primary loan upfront. This loan is backed by the FHA and/or VA programs.
- Fannie Mae or Freddie Mac loan program: These two agencies are major lenders for mortgages. Their loans are perfect for those with strong credit, and it allows them to just put three percent down on the purchase price.
- HomePath ReadyBuyer Program: This program requires recipients to complete a course about homeownership, they can only purchase a foreclosed property owned by Fannie Mae, and they offer assistance for three percent in closing costs.
- Good Neighbor Next Door buyer aid program: The HUD or US Department of Housing and Urban Development offers this program for first responders and teachers. Police officers, firefighters, EMT, and other law enforcement officers are eligible.
Conclusion | First Time Homebuyers
Becoming a homeowner doesn’t need to be moved to the back burner because you don’t have enough funds for a down payment. There are many low and no interest options for you to get into your dream home without putting yourself in a dangerous financial position. Owning a home should be accessible to everyone, and these local and government agencies are helping first-time homebuyers all over the country.
About the Author:
Greg Covell is a Vancouver area Realtor who is dedicated to helping homeowners sell their home or buy their dream home. He services the areas surrounding Vancouver Canada such as Maple Ridge, Langley, and Pitt Meadows.