Essential Info on First-Time Home Buyer Grants

Many couples, young families and individuals share the long-term goal of buying a home. However, this goal has become more and more difficult to attain.

If potential buyers do not have an excellent credit score or their income levels are not high enough, they may have a hard time obtaining approval from a lender.

Many buyers are therefore seeking first-time home buyer grants from the federal government.

These grants are alternatives to the traditional mortgage path and may help families finance their homes, even if they do not meet the normal requirements.

Where do first-time homebuyer grants come from?

First-time homebuyer grants are offered through the Department of Housing and Urban Development (HUD), which has established several federal programs to help first-time and low-income buyers purchase a home.

The regulations created by HUD state that applicants must still meet certain requirements to qualify.

For instance, their credit scores must be above a certain minimum and they must still be able to finance the home over the entire life of the mortgage.

Nonetheless, these requirements are much less difficult to meet than those set forth by a private lender.

What assistance is provided in the first-time homebuyer grant program?

The HUD department is home to the Federal Housing Administration (FHA), which guarantees that applicants will have a better chance of qualifying for home loans through its program.

The FHA does this by ensuring the mortgages of low-income, first-time buyers. This, in turn, allows approved third-party lenders to offer FHA applicants better interest rates and smaller down payments.

Additionally, the HUD program has a market for HUD homes. If a family that purchased an FHA-insured mortgage goes through foreclosure, the HUD program will place these homes back on the market in order to make up for the money lost in the foreclosure.

HUD homes are often priced at much lower rates than other homes in the housing market.

If an applicant is approved for FHA loans or HUD homes, they are required to take an approved counseling course in order to understand all aspects of the process and develop a financial strategy.

What are first-time homeowner vouchers?

You may not qualify for an FHA loan if you have a credit score lower than 580 or you are unable to demonstrate that you will be able to make mortgage payments each month.

However, there is another option offered by the federal government.

The Internal Revenue Service (IRS) may deem you eligible for a tax credit if you can demonstrate that you are a first-time homebuyer and have been rejected by one or more third-party lenders.

In addition, there are other first-time homeowner grants offered through different assistance programs at a local, state and federal level.

For instance, the HUD organization also offers a Homeownership Voucher program.

This program gives low-income families or families in public housing the opportunity to become homeowners by providing them with subsidies that lower the cost of a house.

First-time buyers also receive financial assistance with mortgage payments each month and certain household expenses.

To qualify for a voucher, applicants must meet the requirements established by the HUD program.

They must also satisfy the requirements of their local public housing agency (PHA) such as:

  • Be first-time homebuyers, according to the HUD definition.
  • Meet a minimum income level established by their local PHA.
  • Be 18 years of age or older or have at least one adult in the family who has a full-time job that will last for at least one year.
  • Take and pass a homeownership counseling program through the HUD department.

Applicants must contact their local PHA to apply for the Homeowner Voucher Program.

They may also contact the HUD program if their local PHA does not have a first-time buyer homeownership program.

Learn About Types of Loans Offered by the FHA

There are two main programs offered by the HUD department which may help you find an affordable home loan.

As mentioned above, one of the best options for you may be the FHA loan.

This loan is only insured by the FHA, meaning that your lender will be an approved third-party provider.

You may find success with the FHA even if you have not had any success with private lenders, because the credit score and down payment requirements are less strict.

Third-party lenders are willing to give you a better deal on a mortgage because they know that the FHA will pay for the cost of the home if you undergo foreclosure.

Depending on your income and your current circumstances, you may qualify for a down payment as low as 3.5 percent of the home’s purchase price.

You may even be deemed eligible with a credit score as low as 580. The FHA website lists third-party lenders that are approved for the program, so you will have an easier time finding a lender that suits your needs.

What is the Good Neighbor Next Door program?

The Good Neighbor Next Door program offers homes at a discounted price to qualifying individuals in a community, such as law enforcement officers, firefighters, teachers and emergency medical technicians (EMTs).

In exchange, the community member must commit to living in the home for a minimum of 36 months and use the home as his or her primary residence.

One of the goals of this program is to revitalize communities that need assistance.

A town may be labeled as a revitalization area depending on the average household income, homeownership rate and the number of FHA homes in the area that go through a foreclosure.

The Good Neighbor Next Door Sales program will provide you with a list of single-family homes for sale.

Keep in mind that the homes are only listed for purchase for seven days. This means that the list of available properties changes frequently and the number of available houses in an area is limited.

To find potential homes, search for listings in your state and follow the state’s application instructions.

If you make an offer on a home that already has an offer, a lottery will take place.

The HUD program will also require you to sign a second mortgage.

This is often called a silent second mortgage and has no interest or required payments, provided that you live in the home for a minimum of 36 months.

Learn About Programs that Help Veterans with Loans and Mortgages

You may be eligible for veteran homeownership assistance if you are a veteran and a first-time homebuyer.

The department of Veteran Affairs (VA) may help you receive approval for a home loan or mortgage by guaranteeing the loan.

In effect, you may qualify for better interest rates and smaller monthly payments. The VA also offers Specific Adapted Housing (SAH) grants and Special Housing Adaptation (SHA) grants.

You may qualify for an SAH grant if you have a permanent service-related disability and want to live independently or improve your quality of life.

The SHA grant may also improve your quality of life by giving you the funding to purchase a home with disability accommodations or upgrade your home to make it more accessible.

To find out which type of grant best suits you, contact the VA department.