ReSET Blog
Blog · April 06, 2022 · AUTHOR: Alan Perez

First-Time Homebuyer Programs

In today's market, where even the most stable job can be at risk, buying a home is a dream pursued by almost everyone. But for many people, it's just out of reach. Fortunately, there are government programs in place to help. These programs can help you get into the home of your dreams, even if you're a first-time homebuyer. The good news is that these programs are available for you, even if you've never bought real estate before.

What is a first-time homebuyer program?

A first-time homebuyer program is a government-sponsored program that helps you purchase your first home. It's designed with the idea that people need to have an affordable home before they can invest in other things, like retirement. So, first-time homebuyer programs help those that are interested in buying their first property but don't qualify for a traditional loan. These programs offer incentives like low-interest rates, down payment assistance, and more.

Government mortgage assistance programs

Many people believe that buying a home is complicated. Fortunately, there are government programs in place to help make it easier. These programs can provide you with incentives, such as down payment assistance, closing cost assistance, and reduced monthly interest rates. You'll want to think about these programs as you start shopping for properties to purchase. These programs can assist with the home purchase, not just with the mortgage payments.

There are many government mortgage assistance programs available to first-time homeowners. For example, the FHA loan program offers down payment and closing cost assistance loans to qualified borrowers. It can be used on top of a standard mortgage loan or combined with one of their other low-cost options. Other programs include the Federal Housing Administration (FHA), USDA Rural Development Guaranteed Loans, and Veterans Affairs (VA) loans.

Can the government help me buy a house?

Buying a home can be a real challenge for many first-time home buyers. It can be challenging to save for a down payment and closing costs, qualify for a mortgage loan, or figure out the home buying process. 

Fortunately, government programs at both the federal and state level can help. These programs can provide financial assistance and guidance through the home buying process or lower the costs of buying a home. So if you're thinking about buying a home, be sure to explore all of your options.

FHA Loans

The Federal Housing Administration (FHA) offers several different loan products, but the most popular for first-time homebuyers is the FHA Loan. An FHA Loan is a mortgage insured by the federal government, which means that if you default on your loan, the government will reimburse the lender for the loss. Therefore, it makes it a safer option for lenders, making it easier to get approved for. An FHA Loan also has relatively low-interest rates and low down payment requirements, making it a good option for first-time homebuyers who may not have a lot of money saved up. They are offered through private lenders, and they typically require a down payment of 3.5%.

What are FHA Loan requirements?

  • A FICO score of at least 580 is required for credit eligibility.

  • For most single-family houses, the current FHA loan ceiling is $420,680.

  • Lender/underwriting cost: 1% + an assessment fee ranging from $350 to $1,000.

  • Mortgage insurance premiums are typically 1.75 percent of the loan amount and are incorporated into the loan balance.

  • Mortgage insurance premiums are usually 0.85 percent of the loan amount per year, paid monthly.

VA Loans

The Department of Veterans Affairs (VA) offers a program called VA Loans available to eligible veterans and their families. VA Loans are similar to FHA Loans in that they are backed by the federal government and have low-interest rates and down payment requirements. However, VA Loans also offer 100% financing, which means you do not need to put any money down. It can be helpful for veterans who are unable to afford a large down payment.

What are VA Loan requirements?

  • Fannie Mae/Freddie Mac loan limits are frequently imposed. Conforming loan limitations are now about $647,200 in most locations.

  • Fee for funding/underwriting: The upfront funding cost ranges from 1.4 percent to 2.4 percent due to the down payment and loan purpose. Usually included in the loan amount.

  • It has to be your primary residence: A VA loan cannot be used to purchase a vacation house or an investment opportunity.

USDA Rural Development Guaranteed Loans

The USDA Rural Development Guaranteed Loan program is a government-backed mortgage program available to rural residents. This program offers low-interest rates and 100% financing, making it a viable option for those who want to own a home but do not have the money for a large down payment.

Here's some more information about the USDA loan:

  • Restriction on the location: The property should be in an area classified by the USDA as "rural."

  • Income limits: Your household income cannot be more than 115 percent of the local median income.

  • Fee for funding/underwriting: A one-percentage-point upfront mortgage insurance cost can be incorporated into your principal amount.

  • Monthly costs not included in the package: Approximately 0.35 percent of the loan total for the duration of the loan, paid monthly; as you pay off more of the loan, this cost gets reduced each year.

State-run mortgage programs

Many state loan programs can offer unique benefits like low-interest rates and down payment assistance (DPA). State bond loans and DPA programs are two examples of government and privately supported initiatives that can assist first-time buyers. 

There are various programs available to home buyers that offer financial assistance. These programs are provided by cities, housing finance agencies, counties, nonprofits, lenders, and other groups. In some high-cost areas, even employers offer them.

Other government aid programs for first-time homebuyers

Many first-time homebuyers choose to take a homebuyer education course before purchasing a home. This education can provide them with the necessary tools and knowledge they need to navigate the process. Additionally, many government-run mortgage or down payment assistance programs require homebuyer education. All homeowners need to be educated on owning a home. This class provides that education, and whether or not you are required to take it, it is still worth your time and money. HUD-approved counseling agencies are available in every state to help borrowers at no charge.

What's the difference between a first-time homebuyer program and a government mortgage assistance program?

The government offers programs to help you buy your first home. But there are also programs for those who have never purchased a house before. These programs can assist with down payments, closing costs, and more.

The difference between these programs is the people they're designed to help. For example, a first-time homebuyer program is for those without real estate experience, while a government mortgage assistance program is for anyone who has previously owned property but needs extra help to buy again. In addition, these programs are different in that they provide various types of financial assistance, so make sure you know what you need before looking into them.

Explore your home buying options

if you're thinking about buying a home, you should connect with a mortgage lender and a couple of other professionals. They can help you figure out your options, see if you're eligible for assistance programs, etc. There's a lot to think about when it comes to buying a home. But don't worry—you're not in this alone. SetValue can help you find the perfect agent, and this blog can keep you from making common first-time buyers’ mistakes!

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