Saving up for a down payment or closing costs can be a struggle, especially if you’re a first-time home buyer. But, if you know where to look, there are plenty of grants and programs available to help bridge the gap. For many first-time home buyers, saving up to cover all the purchase payments can be a headache. Between the down payment, closing costs, taxes, and insurance, it can feel a little overwhelming.
But, if you do a little digging (and read the right blogs), you can discover plenty of state and federal grants or programs that can help offset the expenses. Here’s a quick overview of what you need to know about first-time home buyer grants, a few of the most popular options, and how you can qualify.
First off, am I a first-time home buyer?
If you’re buying a house for the first time, yes. That’s obvious. But according to the U.S. Department of Housing and Urban Development (HUD), you’re also considered a first-time home buyer if:
- You haven’t owned a home in the past three years.
- You never owned a home, even if your spouse was a homeowner.
- You’re a single parent who owned a home with their ex-spouse.
- The only home you’ve owned didn’t have a permanent foundation, like a mobile home.
What is a first-time home buyer grant?
Simply put, first-time home buyer grants help make homeownership more affordable for the everyday borrower, because every dollar counts. Closing costs alone, like title insurance, attorney’s fees, appraisals, and more, can run between 2-5% of a home’s value.
Grants help make it easier for new home buyers to absorb that cost, and first-time home buyer programs make it easier for borrowers to secure lower interest rates.
If you haven’t owned a home in the past three years, you can also qualify as a first-time homebuyer. Take advantage of generous grants and programs if you can!
Where can I find first-time home buyer grants?
Think local. Most states, and many counties and cities, offer grants to first-time home buyers.
Ask your real estate agent or lender if they have connections with local programs, or reach out to the local housing authority where you want to buy a home. Work in the public sector? Some nonprofits and employers have grant programs that focus on helping “local heroes,” like law enforcement officers, teachers, or emergency medical personnel.
You can also check out this HUD database of down payment assistance programs run by non-profit organizations across the nation.
How do I qualify for first-time home buyer grants?
Every state has different first-time home buyer grants, so the qualifications will vary by where you live. To qualify for any first-time home buyer grants, you’ll need to qualify for a mortgage first. Get pre-approved with your lender before you start filling out grant applications.
Some grants may have income limits. Many programs are geared toward low- and moderate-income residents. You might also need to complete a home buyer education course, either at a physical location or online.
What does first-time home buyer assistance look like?
Typically, homebuyer assistance comes in two forms: Grants and low-interest loans.
- First-time home buyer grants: This is money awarded to you that you can put towards your down payment and/or closing costs. The money doesn’t have to be repaid, as long as you follow the rules of that grant program.
- First-time home buyer loans: This is money towards your down payment and/or closing costs that you either have to repay at a lower interest rate, or you don’t have to repay until you sell the home or refinance. The best part? Some of these loans get forgiven if you live in the home for a certain amount of time.
What about government funding?
Great question. Chances are, you can qualify for government-sponsored financial assistance, even if your credit has had a few bumps in the road or your income is tight. You might even be able to buy a home with no down payment at all.
While the following programs aren’t only for first-time buyers, these government-backed loan options are often popular choices too:
- FHA loans: A Federal Housing Administration (FHA) loan can help you buy a home for as little as 3.5% down on fixed-rate loans. Bonus: You may qualify for down payment assistance programs with a Cardinal Financial-approved program.
- USDA loans: United States Department of Agriculture (USDA) loans are perfect for anyone looking to buy a home in a rural area. You don’t have to pay a down payment, although you’ll need to pay some closing costs.
- VA loans: United States Department of Veterans Affairs (VA) loans can help veterans, active-duty service members, and eligible surviving spouses buy a home for 0% down, and you won’t have to pay mortgage insurance.
If you’ve got great credit and a reliable paycheck, but only a little saved up for a down payment, a Conventional loan might be for you. You only need a minimum of 3% for a down payment.
Are there other home buyer programs that offer financial assistance?
Absolutely! Here are a couple popular programs that can offer significant savings.
- The Good Neighbor Next Door program, sponsored by HUD, covers 50% of a home’s list price.
A good fit for: Public servants like law enforcement officers, firefighters, emergency medical technicians, and pre-K-12th grade teachers.
What you should know: You must choose from select HUD-owned properties, and commit to live in the home for at least three years. - The National Homebuyers Fund (NHF) provides down payment or closing cost assistance, up to 5% of the total loan amount.
A good fit for: Just about anyone who can qualify for a home loan. As long as you use a participating lender, you can use it with FHA, VA, USDA or Fannie Mae loans.
What you should know: NHF down payment assistance is provided either as a gift or a 0%-interest rate second mortgage, and can be used to buy or refinance a primary residence. The loan is forgiven if you live in the home for at least three years.
Do all lenders work with grant programs?
Good question: Not all lenders participate in all grant programs, so it’s crucial to find a lender that will work with you. If you find a grant you’re interested in, visit the program’s website to get a list of approved lenders.
So, what next?
Worried you might not qualify for these grants or programs? So many would-be home buyers can, and there’s no harm in asking. Expand your buying power and start on your path to home equity by reaching out to a knowledgeable Cardinal Financial loan originator. They’ll go over your situation and help point you in the right direction.
