What First-Time Buyer Help is Available?
If you are a first-time home buyer you may be finding it difficult to purchase a home right now. If you are, you are not alone. This could be due to the fact that home prices have increased greatly and interest rates are expected to rise. It could be due to the very difficult competition of buyers who have larger sums of cash from the sale of a previous home, or that they are investors.
But there is a way to get into a home right now as a first-time buyer. Of course, you want an expert agent working on your behalf, but beyond that, there are several programs out there designed to help first-time buyers get into homes.
What First-Time Buyer Programs are Available Right Now?
Down payment assistance programs or DPAs
It is important to have a sizable down payment for the mortgage of your first home. What can be difficult is finding the means to come up with this large sum of money. As a first-time buyer, you do not have a large amount of equity that turns into profit from selling a home and turns around to be cash that you can use for a down payment.
Most often 20% down is considered a responsible and healthy down payment. This allows you to not have to carry private mortgage insurance as well which can be a couple extra hundred dollars a month in payments. But the average down payment is 7% down and this can even be a stretch to come by.
A down payment assistance program helps a home buyer to cover the cost of a sizable down payment either through a loan or a grant. Some of these can even be used to help cover a portion of closing costs. Most often these programs are available on a local level, especially in certain target areas the government is hoping to get first-time buyers in homes.
Grant programs for down payment assistance help a borrower to cover some or all of the down payment cost on a home purchase. A grant is great in the fact that you do not have to repay it like a loan. There are many states that offer these programs but the eligibility requirements can differ greatly by location and specific grant. You can look for grants by asking the State Housing Authority.
A DPA loan
Some special loans will offer a down payment assistance program to first-time buyers. And often this will come in the form of a second mortgage. A lot of these loans are interest-free or have a very low amount of interest. Sometimes these loans are forgivable if the borrower lives in the home for a certain number of years. What you need to be aware of is that you are responsible for paying back the money if you move or refinance the property.
The good neighbor next-door program
This program is focused on helping public service workers such as school teachers, law enforcement officers, firefighters, first responders, etc. This is a program sponsored by the US Department of Housing and Urban Development. People in qualifying professions are able to receive a 50% discount on the list price of properties that are HUD-owned. These properties will be in designated revitalization areas so it can be a very small number of homes available to finance through this means.
This program expects the participant to sign a second mortgage for the discounted portion of the home price. This second mortgage will not need to have payments or interest as long as you inhabit the home for a minimum of three years.
Home Path Ready Buyer offered by Fannie Mae
This is a government-sponsored housing enterprise that is offering a program to help first-time buyers purchase foreclosed homes. This program allows the buyer to put a very small amount down and a very small amount of closing costs both at 3%. Those able to utilize this program will be expected to complete a buyer education course.
You will also be limited to specific Home Path properties. These properties of course are foreclosed on properties that the Fannie Mae enterprise owns and as such could be in a state of disrepair.
Freddie Mac Home One Loan
Freddie Mac is sort of a partner to Fannie Mae in that it is a government-sponsored housing enterprise. There are only two. The Home One Mortgage Program gives first-time buyers the ability to put only 3% down on the purchase of a home. Buyers will need to take a homeownership education class and carry private mortgage insurance if less than 5% is put down on a home purchase.
There’s no income limit and no credit score minimum for this program but you need to have some sort of credit score to be able to apply. One of the nice things about this program is that it is available in almost every location across the country but does come with a limit of $647,200 for the year 2022. This means that in high-cost areas it may not be a great option.
Each program is going to have its own set of requirements and availability depending upon the local area in which you hope to purchase a home. One of the best ways to find out what first-time buyer programs are readily available in your area is to talk with a trusted real estate agent or ask if they can help direct you to a mortgage professional.
For more information on purchasing a home in central Ohio please contact us anytime.