Don’t let Financing Scare You Off…
Financing Help For First Time Home Buyers (including those who have owned but not for the last 3 years)
Federal loan programs
The federal government backs certain home loans for first-time buyers, as well as for people who aren’t otherwise eligible for a mortgage. Common government-backed programs include:
FHA loans: Insured by the Federal Housing Administration, FHA loans typically have lower qualification requirements than conventional mortgage loans. This makes them easier to get for first-time homebuyers or people with limited or poor credit history. Am I eligible for an FHA loan?
You must qualify for a loan with an FHA-approved lender. In general, your credit score doesn't need to be high.
The price of the home you want to insure must be within the loan limit for an FHA home in its location.
How do I apply for an FHA loan?
The FHA doesn't lend money to people. It insures mortgage loans from FHA-approved lenders against default. To apply for an FHA-insured loan, you will need to use an FHA-approved lender. Search for an FHA-approved lender here.
USDA loans: These federally-backed home loans are ideal for anyone interested in buying property in specific rural areas. There’s no minimum credit score requirement, but they do come with certain income and location requirements. These requirements typically depend on the county, household size and home loan amount.
VA loans: Backed by the U.S. Department of Veterans Affairs, a VA loan is a mortgage loan offered by a VA-approved private lender. These loans often come with lower interest rates than conventional mortgages and are exempt from private mortgage insurance (PMI). They also rarely require a down payment. To qualify, you must be on active duty, a veteran or a surviving spouse. Main pillars of the VA home loan benefit
No downpayment required
(*Note: Lenders may require downpayments for some borrowers using the VA home loan guaranty, but VA does not require a downpayment)Competitively low interest rates
Limited closing costs
No need for Private Mortgage Insurance (PMI)
The VA home loan is a lifetime benefit: you can use the guaranty multiple times
Downpayment Assistance
Down payment assistance programs (DPAs) include loans and grants that can help with upfront and closing costs. They’re primarily geared toward first-time homebuyers.
You’ll find thousands of DPAs throughout the country, most of which are run by state or not-for-profit organizations. Some private lenders also offer them, though.
Eligibility for a DPA varies by state. In most cases, you’ll need to be a first-time homebuyer, meet certain income requirements, and use the property as your primary residence. You may also need to go through a certain type of mortgage lender or home loan program. Many programs also require a minimum credit score of 620.
DPAs come in several forms, including:
Cash grants
Forgivable or deferred loans
Lender credits
Low-interest loans
State Program for First Time Homebuyers
As a first-time homebuyer, you have access to many state-wide programs, resources and incentives. This includes state housing finance agency programs like:
California Housing Finance Agency (CalHFA): This agency mainly helps first-time buyers in California with their down payment and closing costs.
North Carolina Housing Finance Agency (NCHFA): The NCHFA offers down payment assistance, fixed-rate mortgage loans and tax credits to first-time buyers in North Carolina.
The National Council of State Housing Agencies has a list of every state’s agency, as well as its first-time homebuyer qualifications and benefits. The most common benefits include tax credits, down payment and closing fee assistance, and low-interest mortgage loans. Keep in mind that each agency has its own requirements for income, credit score, DTI and other criteria.
Sources: https://www.usa.gov/buying-home, Fox Business News, https://www.benefits.va.gov/homeloans/