First-Time Homebuyer Loans: Support and Special Programs Available

Taking a loan to buy a home is among the most chosen options. The candidates opting to buy the home loan for the first time are referred to as first-time homebuyers. Lenders and banks consider such candidates and provide interesting offers to attract them. The candidates are advised to use a home loan calculator while trying preferred home loan rates and different tenures to select the best possible EMI option. 

First-Time Homebuyers

Individuals or candidates purchasing the home for the first time are referred to as first-time homebuyers. Their very first home bought by the money is referred to as the principal residence, main residence, or primary inhabited location. The US Department of Housing and Urban Development has few criteria to deem an individual a first-time homebuyer. 

  • The person or candidate does not own a house, regardless of property ownership of the spouse
  • A person not owning a home for a three-year prior period ending on the date of purchase of the new home 
  • A single parent who previously owned a home with an ex-spouse
  • Displaced homemakers who previously owned a house in collaboration with their spouse 
  • Owing a non-compliant property with respect to local or state building codes
  • A person owning a mobile home

Note: Remember that buying a home should be a well-thought and processed decision. Use a home loan calculator after properly comparing the home loan rates. 

Programs for First-Time Homebuyers

Applicants can look for the following basic programs: 

  • Loan programs: Here, the loan is offered at the lowest downpayment of around 3% or even 0%. Government-backed loans are approved at lower credit scores, down payment, and income amounts compared to conventional loan programs. 
  • Down payment assistance: The program offers financial help for down payment. The payments are offered as a grant or as a loan. The offering might not need to be returned or forgiven in certain cases. These programs’ down payments or grants are offered only if they follow three criteria. The applicant must not have owned a home in three years, should occupy the home within 60 days after closing, and need assistance for a primary residence. Looking at home loan rates and then using a home loan calculator is an efficient method to estimate the finances and understand the savings. 
  • Closing cost assistance: This program provides the closing cost, which lies between the range of 2 to 6% of the loan amount. The money is offered either as a grant or as a loan. The appropriate candidates for the program are first-time home buyers who make 100% or less of the median income in the local area, and the assistance is provided by Fannie Mae or the Federal National Mortgage Association. Consider different home loan rates and use a home loan calculator to understand the expenditure. 

Fannie Mae and Freddie Mac First-Time Homebuyer Loan Programs 

These private government-sponsored enterprises (GSEs) help repay the guarantees and then package them for resale on the secondary market. The several programs offered here are: 

  • Freddie Mac HomeOne: The applicants can benefit with a down payment as low as 3% without any income limits. The eligibility criteria encompass one-unit properties. 
  • Freddie Mac Home Possible: The applicants here also can benefit with a 3% down payment provided in the form of gifts or loans from family, secondary financing, employee-assistance programs, or sweat equity. The eligibility criteria include homebuyers with an income of 90% or less than the median income. The properties in the list include those with one to four units, condos, planned-unit developments, and manufactured homes with certain restrictions. 
  • Fannie Mae HomeReady: The program is open for first-time and repeat home buyers with low incomes who can get a 3% minimum downpayment. The applicants also get the option to merge down payment and closing cost assistance without using personal funding up front. 
  • Fannie Mae HomePath Ready Buyer: The applicants with income 100% or below the median income for the area can qualify for the program. It assists in buying foreclosed properties owned by Fannie Mae with low down payments of 3%. The borrowers may also qualify for closing cost assistance up to 3%. 

Federal Housing Administration (FHA) Loans

The applicants, both first-time and repeated homebuyers, can look for assistance from FHA. The credit qualifications are less strict here compared to the bank. It offers a 3.5% down payment, reduces closing costs, assists homeowners in financing energy-efficient updates, and helps seniors stay in their own homes. The FHA backs the bank and private lender-issued mortgages. Applicants can seek the facility from any of the FHA-approved banks. 

U.S. Department of Agriculture (USDA) Benefits

It is also known as the SFH Guaranteed Loan Program. It aids people looking to buy or upgrade homes in poor condition and located in rural areas. The offered amount can be around 100% finance. It is a loan guarantee to the bank, not a government loan. The eligibility criteria allow loans to individuals with income up to 115% of the national average. 

IRS Benefits

The Individual Retirement Account (IRA) includes individual money. Early withdrawal before the age of 59.5 years is associated with a 10% penalty. The IRS benefits allow withdrawal of a maximum amount of around $10,000 on a penalty-free basis. It is a lifetime limit. The limit applies separately for each partner for a married couple. It makes the combined limit to be around $20,000. The home in question must be the principal residence for the applicant, regardless of its association with the land. Ensure using a home loan calculator to estimate the requirement of personal savings based on home loan rates

Frequently Asked Questions

Q1. What are state and nonprofit-based first-time homebuyer loan programs? 

Ans. The different state and nonprofit-based first-time homebuyer loan programs are the California Housing Financing Agency, Habitat for Humanity, and the Texas Department of Housing and Community Affairs. 

Q2. What are the factors required to approve oneself as a first-time homebuyer?

Ans. High credit score, proper debt-to-income ratio, and income source are among the main qualification criteria. 

Q3. Is it permissible to use more than one assistance program?

Ans. Yes, the applicants can merge and take benefits from the programs. 

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