Qualifying for first-time home buyer programs may not be as hard as you think. These programs are specifically designed to help qualified first-time homebuyers like you overcome some of the more common hurdles people face when buying a home. Those hurdles, of course, include saving for a down payment and the closing costs.
If you could use some assistance as a first-time homebuyer—and who couldn’t—then this article is for you.
Many Down Payment Assistance Programs Are Available
One of the biggest roadblocks qualified first-time homebuyers encounter when buying a home is coming up with a down payment. The U.S. Department of Housing and Urban Development provides funds and grants to help first-time homebuyers who need financial assistance. There are also conventional loans, fixed-rate loans, and adjustable-rate mortgage options that require little or no down payment.
This section describes some homebuyer programs that can help with your down payment.
Community-based down payment assistance programs
Many cities and communities offer payment assistance programs if you buy within their municipal boundaries. For instance, in Denver, there is a program that offers a loan of up to $10,000 for qualified applicants. Check all the programs available in your area here, or speak to your APM Loan Advisor for details.
Charitable down payment assistance programs
Many charitable organizations offer down payment assistance programs that include grants and loans, which can be used with most first-time homebuyer programs. These can be regional or national and can apply to first-time buyers in general, to underserved groups such as Native Americans, to specific homes such as those that are energy-efficient, or even to underserved areas where incomes are below a certain level.
State and regional down payment assistance programs
Some state and local agencies have down payment assistance programs to help qualified first-time homebuyers purchase a home. California, for instance, has the GSFA, which offers a 0% interest rate loan of up to 5.5 percent of the loan amount. This loan can be used toward a home’s down payment and closing costs. Meanwhile, Texas offers several payment assistance programs through the TDHCA.
National down payment assistance programs
There are multiple national down payment assistance programs available as well, including the Chenoa Fund, which offers 3.5% to 5% of the home’s purchase price in repayable or forgivable assistance, and FHA’s Within Reach program, which offers a forgivable second loan.
Additionally, APM has its own in-house down payment assistance program that offers a lower cost to the borrower. You don’t have to be a first-time homebuyer to access this amazing program. Click here to learn more.
Ask your APM Loan Advisor about the other down payment assistance programs available in your area. And while you’re discussing homebuyer programs, you should learn about mortgage loan options as well. Keep reading to learn more.
Mortgage Loan Options for First-Time Homebuyers
Qualified first-time homebuyers may consider choosing a home loan program that requires a smaller down payment. Some of these programs allow borrowers to purchase a home with as little as 3% down. This includes FHA loans and Fannie Mae loans.
FHA loans
FHA loans (loans insured by the Federal Housing Administration) are government-backed loans with more lenient qualifying guidelines for those buying a home for the first time. These guidelines have lower down payments and require a lower credit score than conventional loans.
If you qualify for an FHA loan, not only could you put as little as 3.5% down, but you could also use gift funds from friends or family members to pay for this reduced down payment amount. To qualify for an FHA loan, borrowers will need to meet guidelines that may include having a minimum credit report score of 580, having a maximum debt-to-income ratio of 45%, and buying the home to use as their primary residence.
In addition, FHA loans require mortgage insurance, which helps protect the lender in case of default. The annual percentage rate and monthly payment for FHA loans will vary depending on the term of the loan and other factors.
Fannie Mae loans
Fannie Mae offers a program for first-time homebuyers (as well as others) with as little as a 3% down payment.
Fannie Mae’s HomeReady Mortgage program has expanded its requirements to help borrowers who earn below 80% of the area’s median income. This mortgage loan program requires a minimum credit score of 620, and the home must be the buyer’s primary residence. At least one of the first-time homebuyers will also need to complete a homebuyer education course.
Do I Need to Be a First-Time Buyer to Qualify for Down Payment and Closing Cost Assistance Programs?
Many first-time home buyer programs require that at least one of the borrowers is a first-time buyer, but that doesn’t mean you won’t be eligible if you’ve purchased a home before.
“First-time buyer” generally includes anyone who hasn’t owned residential real estate within the past three years. That means you could qualify for a first-time buyer program even if you have purchased a home before.
Your mortgage loan advisor will be able to explain what options are available to you. Whether it’s a home loan program with a low down payment requirement, more lenient qualifying guidelines, or a junior loan or grant to help you pay your down payment and closing costs, you may be surprised at the number of solutions at your fingertips.
Every loan program or down payment assistance program has its own qualifying guidelines, so your mortgage loan advisor will be your best source of information. They can help you understand which program is a good fit for you.
Would you like to learn more about how to overcome the obstacles to homeownership? Download our free First-Time Homebuyer Checklist, or check out this blog for first-time homebuyer tips to get started on your way to buying your first home!
And once you’re ready, APM is here to help with all your homebuying needs. Whether you’re a first-time buyer, a move-up buyer, or someone who needs a little help with the down payment and closing costs, our APM Loan Advisors are here to help!
