Purchasing your first home is an exciting time of life. Say what you will about the American Dream, but having the capability and fulfillment of owning a house is a milestone in life, one worth looking to.
The problem is that houses are expensive. Costing thousands of dollars, the chances of purchasing your own home independently on the power of your own dollar isn’t the same as it was 50 years ago.
Achieving the goal of home-ownership, especially for those who’ve never owned one before, prompted the development of first time home buyer programs. Even if you earn a moderate to low income, depending on your field, where you live, and your economic standing, you can receive support and guidance toward getting a roof you can call your own.
With many of these first time home buyer programs backed by governmental organizations, there’s more security in the offer. Privatized companies are more likely to take advantage of first home buyers, jacking up mortgages and increasing interest rates.
With some built-in security, these programs are designed to help you secure reasonable mortgages with low interest rates, even if your credit score is weak.
How We Choose Our List
As there’s an entire market of first time home buyer programs available, it can be tricky finding the best one for you. Every state provides specific types of programs aimed at their residents, but we’re not going to try and work with those.
For this list, we’re trying to find programs that anyone can participate in. When it comes to choosing the best first time home buyer programs, there are a few things you should look for:
Here Are the Top First Time Home Buyer Programs
For the most part, none of these programs are intended to be taken in any particular order per their quality. What’s best for you will not be the best program for your neighbor, and vice versa.
Though these programs stand head over shoulders compared to many home buyer programs across the country, they’re all fairly comparable to each other in their own rights.
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In comparison to most any other first time home buyer program in the country, the FHA loan program has easily helped the most people secure a new home. This is mostly due to their requirements, as their standards are a fair bit more lenient to meet than others are. It’s a long-standing program, going on 84 years since its initial founding, and has helped countless people find homes.
Their leniency in which they offer homes to first time buyers center around flexibility for low credit scores combined with a low initial down payment. To qualify, you only need a credit score of 580. With a score that low, you’ll only need to make a 3.5% down payment to start a mortgage on your new home. If you have a lower score than that, such as a score between 500 and 579, you can still qualify, but you’ll need to start with a 10% down payment.
You’ll, of course, also need steady employment, along with a few other qualifications like a Mortgage Insurance Premium and monthly payment. These loans that are given to you are government back, lenders that participate in this program are more comfortable in loaning out the necessary money to provide these homes.
As good as this program sounds, it’s still not risk-free, nor should you expect any of the programs you find to be. Defaulting, falling behind on your payments, and closing costs can make gaining full ownership of your home difficult. However, in comparison to many other programs, this one suits first time home buyers who have trouble securing loans with other lenders best.
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If you’re a veteran who’s looking to purchase their first home, then the Department of Veteran Affairs has a program specifically catering to you. There are a few qualifiers to be met, as any loan will have, but the benefits provided are excellent.
To qualify for this first time home buyer program, you must first be certain that you meet the criteria. As it’s sponsored by the VA, you’ll of course need to be a veteran, so long as you’ve served at least 90 to 181 days of continuous service in the armed forces.
If you’ve served for 90 continual days as an active service member, you will also qualify. Those who were a part of the National Guard or Reserve member for six years are eligible, as well being the spouse of a veteran of service-member who died in the line of duty.
The requirements boil down to a select group of Americans who’ve served or were married to a now-deceased service member. Once you fit into any of these qualifications, you’ll then be given options on different types of mortgages. The advantage is that you won’t be required to make a down payment, though the mortgages are dependent on your military status.
Since these loans are government-backed, these loans offer competitive low interest rates, combined with no PMI requirement or prepayment penalty. With no insurance required, no down payments, and with reasonable fixed-rate payments on the mortgage, it’s an extremely good deal for military veterans.
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In an effort to revitalize struggling communities around the country, the Good Neighbor Next Door program was established to incentivize community workers to change location.
As a program, it’s only available to people in certain careers:
For first time home buyers, this program presents an opportunity for growth and development for communities around the country. The houses that are primarily going to be available in this program are in areas in desperate need of improvement. These sorts of areas may be suffering from urban blight, rural abandonment, and others where people are reluctant to live in.
The primary requirements, beyond being in one of a select criteria of professions is to make a few commitments once you agree to a home. All homeowners are required to reside within the property they’re provided for 36 months. If the homeowners commit to this property for that time period, they are then able to receive a 50% discount on the list price of the home.
Suffice to say, 50% a home is a great deal. However, there are factors to consider, namely that these homes are going to be placed in revitalization areas. The location will almost certainly not be an ideal place to live for any number of reasons. When participating in this program, it’s best to first consider the balance between owning a home and the location that home will be in.
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The U.S. Department of Agriculture has their own presence in the home buyer program market, aiming to secure housing for those interested in rural areas.
Low-income, first time home buyers that participate in this program can qualify for homes in select regions around the country. The definition of a rural area, however, is a little vague by the USDA’s standards. You may be able to find homes in suburban areas as well.
The most enticing part of this program is that the loans carry little to no down payments required on a house. This is balanced by the USDA insuring the lenders who are a part of the program. Furthermore, to actually qualify for the program, you’ll need to meet certain income requirements to be included in the low-income portion of Americans.
Also due to the low down payment nature of this program, you will need to be insured yourself. This insurance premium will factor into the monthly payments you’ll also be making to help pay off your mortgage. However, those premiums usually run about 1-2% of the total loan amount. It’s affordable, but nonetheless something to keep keen track of, especially for low-income homeowners.
To qualify for a USDA loan, there are certain criteria you’ll have to meet. For starters, you have to be low-income, meaning you aren’t making more than 115% of the median income for the area you’ll be living in. Your credit score should be at least 620, which makes the whole process more streamlined and easier.
It’s possible to secure a USDA loan with scores lower than 620, even lower than 580. The space between 620 and 580 will result in a closer look at your application. Scores lower than 580 are still possible to secure a loan with, but the difficulty is much higher with scores in that range. There are other criteria that are applicable toward a USDA loan, but primarily it revolves around your income, your intention to use that income on your mortgage, and having an applicable credit score.
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The programs sponsored by Fannie Mae and Freddie Mac are two government-sponsored enterprises that have developed a market for homebuyers.
As two of the largest presences in the industry, they provide first time buyers the opportunity for their first home. Cooperating with local vendors around the country, their primary audience are low-income, low credit-score individuals who are looking to purchase a home.
The concept of their program is called a conventional 97% mortgage. Those who qualify for these programs are only required to put down a low 3% down payment to be given ownership over their home. However, this requires that you meet a certain credit score, namely as long as you can meet 620. With higher scores, potential homeowners are capable of securing even better down payments and mortgages.
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Buyer’s Guide for First Time Home Buyers
The first time home buyer programs listed here are only a taste of the vast assortment of available programs available around the country. If you’re interested in owning a home, then looking into local and state-sponsored programs may provide extended opportunities for home ownership beyond national-level programs.
Whenever you’re scouting out potential programs, make sure to check to see if they meet your own requirements:
Wherever you end up living should be comfortable and affordable. While owning a home is the dream of many Americans, you need to make sure it’s the right one for you.
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