If you’re looking to buy your first home but need a little financial help, you have options! Many people think owning a home is a pipe dream because they can’t afford the down payment or closing costs.
But that’s not the case anymore, because there are many grants and loan programs in place to help first-time buyers get into their first home or even their forever home.
While there are thousands of down payment assistance programs all over the country, they are all similar in that they help with down payments and/or closing costs. Some are grants that don’t have to be paid back at all, and some are loans (of all different kinds, such as deferred payment loans, no or low-interest loans, and even forgivable loans which don’t have to be paid back as long as you meet the requirements). While there are grants that are offered nationally regardless of location, there are many that are offered locally, so be sure to look into programs in your municipality and state, as there are far too many to list here. Let’s explore first-time homebuyer grants to help get you into your first home, because who doesn’t love free money?
How do I qualify for a first-time homebuyer grant?
All grants, like all loans, have eligibility requirements, so just because you’re a first-time buyer doesn’t mean you are necessarily qualified for all first-time buyer grants. But you may be qualified for some! The requirements differ from grant to grant, but many share requirements, such as taking a homebuyer education course, minimum credit score, income limits (low to moderate-income), making the home your primary residence, home purchase price limits, etc…
And at the same time, even if you have owned a home (or even several homes) in the past, you may still be considered a “first-time buyer” and therefore eligible for first-time buyer grants if you haven’t owned one in the past three years. That is the standard measurement for “first-time” home ownership. So with grants having different requirements, applying will require you to do some leg work to find them and see which ones you are eligible for. Some have looser requirements and some are more restrictive; it just depends. Keep in mind, that there is no harm in applying for multiple grants at one time. You can apply to every grant you’re eligible for to increase your chances of getting one.
Where can I find first-time homebuyer grants?
We’ll cover some specific grants later in this article, but there are thousands available nationwide. The problem is most of them are not advertised, so you will need to research and ask around to educate yourself on the options available to you. No matter where you live or are looking to live, there is a local housing authority that can help point you in the right direction on grants that you may be eligible for. So start there. In addition, your realtor and loan officer can help. Remember, you’re not the first person to ever need financial help. Your realtor as well as your lender have probably worked with people in the same boat as you, so they can advise you of some programs. Your lender may even have a program that they offer themselves.
Also ask your credit union or bank, as many offer their own grant programs to benefit their local community. Many non-profits offer grants as well, but one important clarification to make is that the federal government doesn’t provide grants to borrowers. Instead, the FHA grants funds to cities and states, which then give grants to borrowers. The FHA doesn’t offer loans either; they insure them. But you can get grants to combine with your FHA-insured loans.
While you will need to research to see what grants are available to you, we’ll get you started below with a few grants to look into.
National Homebuyers Fund
This grant is offered by the National Homebuyers Fund (NHF) to help low to moderate-income buyers achieve home ownership. This down payment assistance program offers up to 5% of your mortgage amount, which can be given as a grant, a standard loan, or a forgivable loan that is forgiven in full after you’ve lived in the home for three years. You do not have to be a first-time buyer to qualify, as it also applies to repeat buyers as well as homeowners who are refinancing. This program is also flexible with its requirements regarding income limits, credit score (around 640), and debt-to-income ratio (45%). According to their website, the NHF has helped over 45,000 people/families and given buyers more than $387.7 million in down payment assistance. Plus, funds can be used in combination with other loan assistance programs and apply to conventional mortgage loans and VA, FHA, and USDA loans.
HomePath Ready Buyer Program
This program was created by Fannie Mae, which helps low to moderate-income buyers afford homes. This program offers assistance up to 3% of the cost of the home and also allows a down payment as low as 3%. But it has strict eligibility requirements. To qualify, you must purchase a HomePath property, which is a home that Fannie Mae foreclosed on and took ownership of after the borrower defaulted on his loan. In addition, you must take a homebuyer education course, move into the home within 60 days of closing, make the home your primary residence and be a first-time homebuyer who hasn’t owned a home in three years.
Good Neighbor Next Door Program
Offered by the U.S. Department of Housing and Urban Development (HUD), this is a forgivable loan, meaning it does not need to be paid back. So while it is technically a loan, it is basically a grant as long as you meet their requirements. Current and former teachers, firefighters, EMT’s and police officers are eligible for this loan which offers a 50% discount on the home. But you must live in the home for three years, it must be your primary residence and the home must be located in a designated economically-distressed area also called a “revitalization area.” Similar to the HomePath Ready Buyer Program, the home must be owned by HUD, which took possession of the home due to a foreclosure. If you are a public service worker, this is a great option to look into.
In addition to grants and forgivable loans that don’t need to be repaid, there are other affordable loan programs with low down payment requirements for those who qualify, including FHA loans, VA loans, and USDA loans. FHA loans, long considered the friendliest loan for first-time buyers, only require 3.5% down. USDA loans do not require a down payment at all but are only available for homes in rural, less populated areas, and there is an income limit of 115% of the local median income. VA loans are only available to military members/veterans but require no down payment. These are also options to consider if you are eligible and are looking for ways to lower your down payment.
The Bottom Line
There is no shame in needing financial help with your down payment and closing costs. There are many options to consider, and many of them can be used in combination with others. The important thing is to do your research and talk to an expert to find the best option or options for you.