First-Time Home Buyer Programs

There are a number of first-time home buyer programs that make both the process and cost of buying your first place easier. First-time buyers face one unique challenge in particular: they cannot count on the profit of a home sale to supply the down payment for their new house. First-time home buyers often have a smaller down payment to offer as a result. They may also have a slightly lower credit score because they have not had a major loan in the past. To conquer these problems, there are federal, local and private programs to help you find a mortgage loan.

Federal Assistance

A good place to start when you are seeking first-time home buyer assistance is the Federal Housing Administration (FHA). The FHA was established as part of the U.S. Department of Housing and Urban Development (HUD). The goal of this department is to extend home ownership to more Americans. The FHA, for its part, assists this mission by providing guarantees on private mortgage loans. This means the FHA offers insurance on your loan, promising to purchase the loan out of default if you can no longer pay. With an FHA guarantee, a mortgage lender can take on a greater risk in extending you a loan.

FHA loans are not designed to assist low credit or unqualified borrowers. Instead, they are specifically geared toward qualified borrowers who may need special assistance, such as first-time homeowners. The first-time home buyer program allows for as low as 3.5 percent down.

Local Grants and Assistance

You may find there are local grants in your area to encourage first-time home buyers. Grants are different from loans because they require no repayment. For example, the Homes and Communities program of the HUD allows for grants to cover closing costs under certain circumstances. These grants are directed at buyers purchasing homes in specific transitional neighborhoods. Those who receive the grants are required to take a class in personal finance, but these classes can prove to be extremely useful.

Local areas also present grants to new homeowners. Contact your community development office to learn about programs that may apply to your situation. A grant is typically small, a few thousand dollars or under, but this never needs to be repaid. Therefore, considering you would otherwise be charged interest on the sum, grants can truly pay off.

Private Lender Programs

Private lenders like first-time home buyers with good credit and income stability. Once a lender secures a new client, the client is more likely to return for other loans in the future. If you have a good credit score, consider asking at your local bank about programs for first-time buyers. You may find low down payment options available if you meet specific qualifying criteria.

If you plan on seeking an FHA guarantee, go directly to an FHA-approved lender. This eliminates the need to file two sets of forms, and it helps ensure you will receive the guarantee with the lender you have chosen.