First time? Loan Programs and Home Buying Assistance.
- Contributor to #CharkInvest
- Feb 28, 2017
- 3 min read
"With so many different program options available to first time home buyers, it can be difficult to sort through it all and figure out which one makes the most sense for your specific situation. Whether you are having difficulty finding qualifying for your first home mortgage, or financing at affordable rates, doing your research will help. Understanding the differences between financial assistance programs and loan programs, is crucial to making the right financing decision in this exciting and overwhelming process."
Loan Programs
Mortgage loan programs are designed to make borrowing affordable for homebuyers, while protecting lenders against borrower defaults. They can be guaranteed by a variety of different organizations, and are typically offered by commercial lenders, such as mortgage companies, banks, or credit unions.
Freddie Mac Home Possible® Mortgages.
Also known as Freddie Mac, the Federal Home Loan Mortgage Corporation is available to buyers who need a home loan, but want to make a much smaller down payment. Through this program, down payments as low as 3% are offered by certain lenders. While the program is not exclusively for first-time buyers, if interested, first timers are required to complete a borrower education program in order to qualify.
The Federal Housing Administration (FHA)
While the FHA does not provide loans, they do provide insurance and protect lenders in the event of borrower default on loan payments. While these loans are not exclusively available to qualified first time buyers, due to easier requirements, they are often used by first timers. For a potential home buyer with a credit score of at least 580, for example, an FHA loan may require a downpayment as little as 3.5% of the purchase price of the home. If the buyer has a credit score between 500 – 579, they may still qualify, but be required to supply a larger down payment of 10%, and incur a higher interest rate.
United States Department of Agriculture (USDA) Single Family Housing Guaranteed Loan Program.
This program is designed to help offset the risk lenders take on by offering loans to eligible rural home buyers, similar to loan programs provided by FHA and VA, the USDA. These loan guarantees 90% of the mortgage loan amount provided to borrowers in rural areas with low to moderate incomes.
The Veteran’s Administration (VA)
The VA also guarantees home loans provided by mortgage companies or private banks. These loans allow veterans, eligible surviving spouses, and active duty service members, to purchase homes at competitive interest rates, provided they have sufficient income to make the agreed upon monthly loan payments and have satisfactory credit scores. An additional perk of this program is that qualified borrowers are not required to purchase private mortgage insurance or make a down payment
Home Buying Financial Assistance
Financial assistance programs are those that provide assistance with funds for closing costs, down payments, or other expenses associated with the home purchase process across all levels of government: city, state, and federal.
Fannie Mae’s HomePath Ready Buyer Program (FNMA or “Fannie Mae”)
FNMA launched the HomePath Ready Buyer program in 2015 to help first-time home buyers with a rebate of at least 3% of the home’s purchase price to assist with closing costs. In order to receive the 3% rebate, buyers must participate in and complete a homebuyer education course online.
State-by-state homebuyer programs
State sponsored homebuyer program offerings vary widely, so be sure to check your state’s housing website for details about programs in your area designed to help first time buyers and other qualify for the mortgage they need. Texas, for example, has the Texas Mortgage Credit Certificate Program which helps eligible first-time home buyers with low or moderate incomes convert mortgage interest into a federal income tax credit. In New York, buyers who qualify for the Conventional Plus Program can receive down-payment assistance up to 3% of the home’s purchase price.
City & county homebuyer programs
In addition to state sponsored programs, individual cities and municipalities can also be of great assistance to homebuyers when it comes to home financing. In San Francisco, for example, the Mayor’s Office of Housing and Community Development provides loan assistance programs for first-time home buyers, similar to those found in Miami/Dade County in Florida. Be sure to consult with your city or county offices to determine if there are any similar programs that can help meet your individual needs.
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