Even the thought of buying your first home can be exhilarating. At the same time, the homebuying process can seem overwhelming and maybe just a little frightening. After all, buying a home is a huge financial responsibility and one of the most important decisions you’ll ever make. Fortunately, there are numerous resources for first-time home buyers that can help you learn about buying a home, the homebuying process, and how to secure the first-time home buyer loans and financing you need. Let’s take a look.

Types of Resources for the First-Time Home Buyer

If you are a first-time home buyer, meaning you’ve never bought a home before or it’s been more than three years since you’ve owned a home, there are many resources you can take advantage of. These are offered by various parties and can include the following: 

Down payment assistance

In most cases, you will need a down payment to buy a home. This is a lump sum payment that is a percentage of the purchase price. While 20% or more is ideal, many people can get a mortgage with as little as 3% down.

There are down payment assistance (DPA) loans and grants that can help you gather enough for your down payment. Loans will help reduce the amount you have to come up with on your own. Types of loans include a second mortgage and deferred payment loans, which typically have to be paid when you pay off your mortgage or sell.

DPA grant programs are also available. Grants don’t have to be repaid. Check with your state or municipal governments for grant programs in your area.

Government-backed loans

Government-backed loans are one type of first-time home buyer loans that you can use to purchase a home with a low down payment or no down payment at all. We’ll talk about these below.

Tax deductions

While Housing and Economic Recovery Act’s $7,500 credit for first-time home buyers no longer exists, you can still enjoy tax savings. There are federal and state deductions on your mortgage insurance and mortgage interest. Other deductions may be available, so check with your state or municipal governments.

Closing assistance

Closing assistance, both government-sponsored and private, helps you cover the costs associated with closing the sale of your new home. These are costs such as legal fees, transfer taxes, and title insurance and they are typically 3% to 6% of your mortgage.

Home buyer education

There are many online home buyer education programs and other resources, such as mortgage calculators. It is often easy to find a class for first-time home buying that is free or costs very little. This will help you learn all the ins and outs of the homebuying process and what it will take to buy your first home.

Federal First-Time Home Buyer Programs

There are a number of federal first-time home buyer programs, including:

Federal-backed loans

The Federal Housing Administration (FHA), the U.S. Department of Agriculture (USDA), and Veteran’s Affairs (VA) all have programs for first-time home buyers. These loans all come with lower risk. FHA loans can be obtained with a down payment of as little as 3.5%. USDA loans also require a minimal down payment and VA loans do not require a down payment.

Good Neighbor Next Door

This is a program that helps teachers, firefighters, police officers, and emergency medical technicians buy a home at 50% of market value. This applies to certain US Department of Housing and Urban Development (HUD) properties that are in foreclosure.

HomePath Ready Buyer Program

The Federal National Mortgage Association, also known as Fannie Mae, makes it possible for first-time home buyers to buy an "as-is" foreclosure property with a down payment as low as 3%. This program also allows you to apply to get as much as 3% of the closing costs back. You will need to take Fannie’s Framework Homeownership course prior to closing and you must live full-time in the home you purchase.

State and Municipal First-Time Home Buyers Programs

What state and municipal first-time home buyer programs are available to you will depend on where you live. Do your research to find out what is available in your area.

Charitable and Non-Profit First-Time Home Buyers Programs

There are a couple of non-profit and charitable options for first-time home buyers who have a low to moderate income. These include:

Habitat For Humanity

This is a non-profit housing organization that builds home for low-income families. The homes are built by volunteers and there is no profit made from the sale of the home. They will help you prepare to secure financing and these homes typically cost less than going market rates.

Neighborhood Assistance Corporation Of American (NACA)

NACA offers people who are financially unstable counseling and education, and they help low-income families find lenders that will give them financing for their new home. The loans acquired through NACA do not require a down payment or closing costs and there is no minimum credit score requirement. There may also be non-profit or charitable resources specific to your local area, so be sure to do your research.

Employer-Sponsored First-Time Home Buyers Programs

Many employers are now offering incentives that will help with a down payment and closing costs. this may include a grant or a loan that may be forgivable over a period of time. Your labor union may also have options to help. Speak with your manager or HR representative to find out if your employer has an assistance program.

To find out more about resources for first-time home buyers, connect with one of our knowledgeable Centex team members today.

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Published 01.11.21