What Are The Best First-Time Homebuyer Programs Available In The US

Last Updated: June 26, 2019
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There are many different types of programs available to homebuyers, but the main two are financial assistance programs and loan programs. Most of the available programs can go under one of these two categories. We've summarized the best first-time homebuyers programs that are currently available in the US:

Nowadays, more and more young people are having problems buying their first home. This is either because they do not qualify for loans or simply because the financial burden will be unbearable.

Despite that, there is always hope for people who are having a hard time. There are many programs aimed at homebuyers facing difficulties, and they provide financial support as well as other types of assistance and help.

In this article, I’ll talk about these programs in detail and hope some people will find them useful, helpful and beneficial.

Can You Be a First-Time Buyer More Than Once?

I know it sounds quite strange, but don’t despair and give up.

Sometimes, even if you have had a home before, you can still qualify as a first-time buyer. According to the US Department of Housing and Urban Development, first-time homebuyer can become such despite the fact they have owned a house prior to that.

Of course, there are some criteria a person should meet to be able to qualify:

  • If you are a single parent and the only home you have had is with your spouse during your marriage.
  • A person or his spouse who hasn’t had their own home for more than three years. If you are a married couple, you can qualify if only one meets these requirements,
  • If you are a displaced homemaker and the only home you’ve had was with your spouse.
  • You are a person who has owned only a mobile home.
  • If you are a person whose first home was not compatible with local ordinances. Therefore, this home cannot undergo improvements in order to meet regulation and official requirements.

Different Types of Programs

There are many different types of programs available to homebuyers, but the main two are financial assistance programs and loan programs. Most of the available programs can go under one of these two categories.

Some loan programs are insured by the Federal Insurance Administration(FHA) and are available to all borrowers. Many different lenders provide customers with FHA-backed home loans which are usually more affordable. In addition, people who have lower credit score and history may also qualify for them.

Not only do commercial lenders offer first-time homebuyer programs but also various private lenders (See how to find the best mortgage lender). Their programs are also in quite attractive conditions, but most probably will require a higher credit score and larger down payment.

Regarding the financial assistance programs, primarily government or local state companies issue them. Below, you will find the most attractive programs for homebuyers and more details about them.

Best First-Time Homebuyer Programs

Here I will list some of the loan programs that are suitable for first-time buyers. These organizations do not issue the loans but rather insure them. With other words, they protect the loan issuer from default on the borrower’s part

1. FHA Loans

These are loans that are insured by the Federal Housing Administration (FHA).  They actually protect lenders (banks, unions, etc.) from a borrower default on his loan payments. Since the FHA insures these loans, it is easier for first-time buyers to qualify for one of them.

The two most important qualifications are:

  • A credit score of at least 580 may guarantee a very low down payment – 3.5%.
  • Borrowers with lower credit score may also qualify at a higher interest rate; they also need to make a larger down payment.

2. VA Loans

The Veteran’s Administration used to be a government body that protected the rights of duty service members as well as their families. Now, this agency is called the US Department of Veteran Affairs, but serves the same purposes. This department can also guarantee mortgages and help veterans purchase a loan at good and affordable terms.

In order to qualify, you need to have a certificate of eligibility which proves that the borrower has served enough time, say in the Army or the Navy. Of course, the higher the credit score, the better the terms of the loans.

3. “Green” Mortgage (EEM)

A “green” mortgage, also known as an energy-efficient mortgage, is any loan targeted towards home improvements that will make your homemore eco-friendly. These improvements might include insulation of old houses, new energy-efficient cooling and heating systems and others. Keep in mind that these loans are not only designated for first-time homebuyers.

The FHA and VA insure these loans, and they offer low down payment and good interest rate if you meet the criteria. There is no age or income limit, and as long as you have a good credit score, you can qualify easily for a “green” mortgage.

4. Good Neighbor Next Door Program

Initially, this program was called Teacher Next Door Program and was for school teachers. It helps people to purchase homes at lower prices and better conditions.

Now, the program includes other professions, such as law enforcement officers, firefighters, pre-kindergarten workers, emergency medical technicians. This program is sponsored by the US Department of Housing and Urban Development (HUD).

This initiative provides borrowers with a 50% discount on the price of a property that is located in a revitalization area. The requirement is to live at least 3 years in this property.  Go and visit the website for some great offers (they last only a week, so hurry up).

5. USDA Single Family Housing Guaranteed Loan Program

There are other government agencies, except for the VA, FHA, HUD, that insure mortgage loans for first-time homebuyers. One of them is the US Department of Agriculture and they provide a 90% guarantee of the loan if the borrower defaults. There are several criteria which you can find here. The main one is that the property should be located in rural areas.

6. Home Possible Mortgages

Freddie Mac (the Federal Home Loan Mortgage Corporation) can also provide some first-time home buyer programs. This program is not strictly targeted at first-time buyers and requires from borrowers to first participate in an education programs. The good thing about Home Possible Mortgage is that the lender will accept very small down payments – 3%.

7. Native American Direct Loan

This program targets Native American veterans and their families.

The US Department of Veteran Affairs directly lends the money to the borrower. It was introduced in 1992 and has been operating ever since. According to the department’s website, these loans “finance the purchase, construction, or improvement of homes on Federal Trust Land, or to refinance a prior NADL to reduce the interest rate”. |

Some of the benefits are no down payment, very low closing costs, a 30-year fixed term, re-usable benefit.

8. FHA Section 203(k)

This is another program that the FHA offers first-time homebuyers. Basically, this is a home renovation loan that requires a low credit score. The down payment is also very low – 3% of the loan.

9. Other Loan Programs

As you have seen already, many government agencies provide either insurance or directly lend money to first-time homebuyers. However, local or state entities can also contribute and provide help. Check out your state’s housing website for information on state loans granted by a local agency. If that’s not enough, try to contact a real estate agent. They usually have tons of information regarding the property.

You can also check out counseling agencies that the HUD has approved. They will give you precious advice and open your eyes to the opportunities available in your area.

Financial Assistance Programs

Unlike loan programs that help homebuyer purchase their home, these assistance programs cover different costs. For instance, down payment, closing costs and expenses that stem from the process of buying a property. All sorts of government, as well as local entities, provide such assistance.

1. Fannie Mae’s HomePath Ready Buyer Program

The Fannie Mae (Federal National Mortgage Association) is one of the government agencies that provide a financial assistance program.

HomePath Ready Buyer Program was launched in 2015. It pays up to 3% of the home’s value in closing costs. If you want to take part in this initiative, first you have to enroll in an online education course.

2. State Home Buyer Programs

In some states, you can take advantage of a home buyer program supported by the state. Visit the state’s housing website and check out the options you have. Or click on this link, you can check what programs your state offers.

For instance, in Texas you can qualify for the Texas Mortgage Certificate Program. Of course, you have to be a first-time buyer and have low income in order to get the support. In California, for example, teacher can apply for the Extra Credit Teacher Home Purchase Program.

3. City Home Buyer Programs

Not only can states offer different financial assistance programs but also separate cities or even municipalities.

For instance, if you are a resident of Chicago, you can take a look at the city’s housing website. There you will find more details about the city’s Home Buyer Program that covers down payments or closing costs.

Bottom Line

As you can see, being a first-time buyer is not that scary.

You can choose from a variety of loan or financial assistance programs backed up by federal agencies, your state or even city. Sit down, take your time and choose the best option. I am sure it’s out there waiting for you.