With mortgage interest rates still low, it’s a great time to be a first-time home buyer. If you aren’t sure you can afford a home or don’t know where to begin, consider this – there are a variety of programs available to first-time home buyers and you don’t always need perfect credit for many of them. Here are a few First-Time Homebuyer Grants and Programs to consider.
An FHA loan is a loan insured by the Federal Housing Administration, and its loans help borrowers with lower credit scores or little down payment. This type of loan is usually chosen because it allows a borrower to put as little as 3.5% down and offers more lenient credit and debt-to-income requirements. Because a small down payment is usually associated with these types of loans, you’ll need government-provided mortgage insurance (MI). However, to compensate, lenders often offer FHA loans at attractive interest rates.
The USDA loan is a loan program guaranteed by the U.S. Department of Agriculture with low interest mortgages designed for lower-income borrowers who wish to live in eligible rural areas. USDA loans offer low-to-no down payments. There are income requirements for USDA loans and because they require low down payments, you’ll need to take out mortgage insurance.
A VA loan program is a US Department of Veterans Affairs backed loan for active-duty military personnel, veterans and some spouses/widows. In addition to lower interest rates and minimal closing costs, the most distinct advantage of a VA loan is that it requires NO down payment and NO private mortgage insurance. Credit scores are important, however, minimum requirements usually lead to a good interest rate.
Good Neighbor Next Door
The Good Neighbor Next Door is a HUD program that provides a 50% discount on a home’s list price in revitalization areas (designated by HUD) for law enforcement officers, firefighters, emergency medical technicians and pre-kindergarten through 12th-grade teachers. There are eligibility requirements and the program is highly competitive. For public service professionals first-time home buyers, the program also offers benefits and grants.
HomePath ReadyBuyer Program
For those first-time home buyer’s who don’t have a lot of money for closing costs and are wanting to purchase foreclosed Fannie Mae property, this program provides up to 3% in closing-cost assistance. Before making the offer, buyers are required to complete an online first-time buyer education course.
FHA Section 203K
The FHA Section 203K loan is great for those wanting to purchase a home that needs major improvements but don’t have a lot of cash to do so. This FHA-backed loan lets you roll the costs on the renovations into your primary mortgage. The down payment on these loans is as low as 3.5% but the cost of the improvements must be more than $5000.
Native American Direct Loan
The Native American Direct Loan is a VA backed loan designed to help eligible Native American veterans buy, renovate or build homes on federal trust land. There is no down payment or private mortgage insurance required, and the closing costs and interest rates are low. However, there is a low 1.25% funding fee due to the VA and there are limits on loan amounts.
Texas State Affordable Housing Corporation Programs (TSAHC)
TSAHC is a non-profit organization created to provide mortgage loans and down payment assistance grants for low-income families and other under-served populations who would not qualify through conventional financial channels. These programs offer 30-year fixed interest rate mortgages, down payment assistance as either a grant or 0% interest, no monthly payments due second lien, and is available statewide. TSAHC offers two first-time home buyer grant programs:
Homes for Texas Heroes Home Loan Program: Designed for teachers, fire fighters and EMS personnel, police and correctional officers, and veterans.
Homes Sweet Texas Home Loan Program: Designed for Texas home buyers with low and moderate incomes.
First-time home buyers that are eligible for either of these two programs can also qualify for Mortgage Credit Certificates – mortgage interest tax credit that lowers the federal income tax amount you would pay every year.