First-Time Homebuyers Lead the Way
There are many people sitting on the sidelines trying to decide if they should purchase a home or sign a rental lease. Some might wonder if it makes sense to purchase a house before they are married and have a family, others might think they are too young, and still, others might think their current income would never enable them to qualify for a mortgage. Many potential homebuyers believe that a 20% down payment is necessary to buy a home and have disqualified themselves without even trying. The median down payment for all buyers in 2018 was just 10% and that percentage drops to 6% for first-time buyers.
You may not be much different than many people who have already purchased their first homes. Please contact us to find out if your dream home is within your grasp.
NAR’s Chief Economist, Lawrence Yun, cited “strong job gains among young adults, less expensive mortgage insurance and lenders offering low down payment programs,” as contributing factors to the increase in first-time buyers.
“Looking into the current trends rent is expected to continue gaining. More widespread rent growth could mean home buying demands stay high, as renters who can afford it move away from the unpredictability of rising rents toward the relative stability of a monthly mortgage payment instead.”
It’s no surprise that with rents rising, more and more first-time buyers are taking advantage of low-down-payment mortgage options to secure their monthly housing costs and finally attain their dream homes.
If you are one of the many first-time buyers who is not sure if you would qualify for a low-down payment mortgage, let’s get together and set you on your path to homeownership!
9 Grants and Programs to Help First Home Buyers
In an FHA loan, the Federal Housing Administration insures the mortgage. The FHA is an agency within the U.S. Department of Housing and Urban Development (HUD).
The FHA’s backing offers lenders insurance, meaning that your lender won’t experience as large of a loss if you default on the mortgage.
FHA loans typically come with competitive interest rates, smaller down payments and lower closing costs than conventional loans.
If you have a credit score of 580 or higher, you could be eligible for a mortgage with a down payment as low as 3.5 percent of the purchase price. If your credit score is lower than 580, you still might qualify for an FHA mortgage, but the down payment would likely be larger.
While not well known, the U.S. Department of Agriculture (USDA) has a homebuyer assistance program.
While the program focuses on homes in certain rural areas, you don’t need to buy or run a farm to be eligible.
The USDA guarantees the home loan. There may be no down payment required, and the loan payments are fixed.
Applicants with a credit score of 640 or higher typically get streamlined processing. With a credit score below 640, you still can qualify for a USDA loan, but the lender will ask for extra documentation about your payment history.
Keep in mind that there are income limitations, which can vary by region.
The U.S. Department of Veterans Affairs (VA) helps active-duty military members, veterans, and surviving spouses buy homes.
The VA guarantees part of the loan, making it possible for lenders to offer some special features. VA loans come with competitive interest rates and require no down payment. You aren’t required to pay for private mortgage insurance (PMI), and a minimum credit score isn’t needed for eligibility.
If it becomes difficult to make payments on the mortgage, the VA can negotiate with the lender on your behalf
The Good Neighbor Next Door program, sponsored by HUD, provides housing aid for law enforcement officers, firefighters, emergency medical technicians and pre-kindergarten through 12th-grade teachers.
Through this program, you can receive a discount of 50 percent on a home’s listed price in regions known as “revitalization areas.”
Using the program’s website, you can search for properties available in your state. You must commit to living in the home for at least 36 months.
Fannie Mae and Freddie Mac are government-sponsored entities. They work with local lenders to offer mortgage options that benefit low- and moderate-income families.
With the backing of Fannie Mae and Freddie Mac, lenders can offer competitive interest rates and accept down payments as low as 3 percent of the purchase price.
Fannie Mae also provides homeownership education for first-time homebuyers through its “HomePath Ready Buyer” program.
If you’ve run the numbers to see how much house you can afford and have determined a fixer-upper is best for your budget, the Section 203(k) rehabilitation program may be a good fit.
This type of loan, backed by the FHA, takes into consideration the value of the residence after improvements have been made. It then lets you borrow the funds you’ll need to carry out the project and includes them in your main mortgage.
The down payment for a 203(k) loan can be as low as 3 percent.
Since 1992, the Native American Veteran Direct Loan program has helped Native American veterans and their spouses buy homes on federal trust lands. The VA serves as the lender.
If you’re eligible, you won’t be required to make a down payment or pay for private mortgage insurance (PMI).
This first-time homebuyer loan also offers low closing costs and a 30-year fixed-rate mortgage.
In addition to the various programs provided by the federal government, many states and cities offer help to first-time homebuyers. These programs change quite often and require working with a professional to ensure various criteria are met.
Before buying a home, check your Century 21 Citywide Realtor to find out if you qualify for any current programs. You also might consider contacting a real estate agent or local HUD-approved housing counseling agency to learn more about programs in your area that might apply to your situation.