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First-Time Home Buyer Programs

tl;dr

What You Need To Know

  • First-time home buyers can access benefits like tax breaks and federally backed loans
  • Some first-time loan options have a lower credit score requirement than conventional mortgage loans
  • You can usually buy your first home with less than the standard minimum down payment of 20%

Contents

Adulting ain’t easy, we know. One of the more challenging adulthood milestones to reach is buying your first house. And one of the most challenging parts of buying your first house is saving up for the down payment. 

Inflation plus stagnant minimum wages[1] equals a generation that makes less money and has fewer opportunities to save. It can make the idea of homeownership feel unattainable for a lot of Millennials and Gen Zers. 

But we’ve got some encouraging news to share. 

There are first-time home buyer programs for aspiring home buyers in your exact situation. These programs have one explicit mission: to make homeownership a reality for buyers who need a little extra help getting their foot in the front door.

Take the first step toward buying your own house. Read on to find out who qualifies for these programs (the answer might surprise you!) and what’s available.

How Do You Define ‘First-Time Home Buyers’?

Drumroll, please: Technically, a first-time home buyer is someone who’s never owned a house. We say “technically” because there are some circumstances when you may have already owned a home, but you can benefit from some first-time home buyer programs because you tick a few other boxes. 

The Department of Housing and Urban Development (HUD) defines a first-time home buyer as anyone who has never bought a house. But eligibility doesn’t end there. You can also qualify if you are[2]:  

  • Someone who hasn’t owned a primary residence within the previous 3 years (this includes spouses who haven’t been listed as a property owner).
  • A single parent who owned property with a former spouse when they were married.
  • Someone who has only owned a primary residence that’s not permanently fixed to a foundation (think: mobile home) 
  • Someone who has only owned property that wasn’t compliant with building codes and the property can’t be brought into compliance for less money than the cost of constructing a new home.

If you’ve never owned a house before or one of those scenarios sounds like you, taking advantage of a first-time home buyer program might be the right option. 

What Are First-Time Home Buyer Programs?

As a first-time buyer, you’ve got plenty of options when it comes to payment assistance for a home. There are programs provided by the Federal Housing Administration (FHA), the IRS and even your state’s government that can help you access a better loan with a smaller down payment. 

In many cases, you can even have your closing costs waived or reduced with these programs. 

Depending on where you live, you may be able to take advantage of state-operated cost assistance programs. First responders, teachers, communities of color and active-duty or retired members of the military may be able to access additional help. 

No matter where you call home in the United States, there are programs that can help you finance your first house.

Who Can Help Me Find a Home? First-Time Home Buyer Assistance Options 

As tempting as it might be to jump in and start house hunting, take some old-school hip-hop advice from Gen X and “check yo’ self before you wreck yo’ self!” A savvy home shopper will do their financial due diligence first. The question you’ll want to answer is whether you can afford to buy a house – even with all that extra help.

If your answer is yes (and you’re ready), it’s time to explore which programs will work best with your budget and your financial situation. 

You need to consider your income, debt-to-income (DTI) ratio before and after the loan and whether your credit score meets the program’s requirements.

Once you’ve done all your calculations, and you’ve got your finances sorted out, get excited! It’s time to start looking for your first house. 

And if you’re wondering who can help you find a home, we’ve got answers. 

Send me your location: By state and region

Feel free to explore home buying assistance programs by state:

Northeast USA

If you live in …Then check out …
ConnecticutConnecticut State Department of Housing
DelawareDelaware State Housing Authority
District of Columbia District of Columbia Housing Authority
MaineMaine State Housing Authority
MarylandMaryland Department of Housing and Community Development
MassachusettsMassHousing
New HampshireNew Hampshire Housing
New JerseyNew Jersey Housing Authority
New YorkState of New York Mortgage Agency (SONYMA)
PennsylvaniaHousing Resources – Pennsylvania Department of Human Services
Rhode IslandRIHousing
VermontVermont State Housing Authority

Midwest USA

If you live in …Then check out …
IllinoisIllinois Housing Development Authority
IndianaIHCDA
IowaIowa Finance Authority
Kansas Kansas Housing Resources Corporation
Michigan Michigan State Housing Development Authority
MinnesotaMinnesota Housing
MissouriMissouri Housing Development Commission
Nebraska Housing.NE.gov
North DakotaNorth Dakota Housing Finance Agency
OhioOhio Housing Finance Agency
South DakotaSouth Dakota Housing Development Authority
WisconsinWisconsin Housing and Economic Development Authority

Southern USA

If you live in …Then check out …
AlabamaAlabama Housing Finance Authority
ArkansasArkansas Development Finance Authority
FloridaFlorida Housing Finance Corporation
GeorgiaGeorgia State Housing 
KentuckyKentucky Housing Corporation
Louisiana Louisiana Housing Corporation
MississippiMississippi Home Corporation
North CarolinaNorth Carolina Housing Finance Agency
OklahomaOklahoma Housing Finance Agency
South CarolinaSC Housing
TennesseeTennessee Housing Development Agency
TexasTexas Department of Housing and Community Affairs
VirginiaVirginia Housing
West VirginiaWest Virginia Housing Development Fund

West USA

If you live in …Then check out …
AlaskaAlaska Housing Finance Corporation
ArizonaArizona Department of Housing
CaliforniaCalifornia Department of Housing and Community Development
Colorado Colorado Division of Housing
HawaiiHawaii Public Housing Authority
IdahoIdaho Housing and Finance Association
MontanaMontana Housing
Nevada Nevada Housing Division
New MexicoNew Mexico Mortgage Finance Authority
OregonOregon Housing and Community Services

By government and convention

If you’re looking for national options to assist with your home purchase, explore some of these programs: 

If you are …Then check out …
An active or honorably discharged military member who has: 
Served 181 days during peacetime
or Served 90 consecutive days during wartime
Served more than 6 years with the National Guard or Reserves
Served 90 days under Title 32, serving at least 30 days consecutively
Note: Spouses of service members who’ve died in the line of duty, or died as a result of a service-related injury, may also qualify for a VA loan
Department of Veterans Affairs (VA) Loans 
A person with a FICO® score (hint: credit score) between 500 and 579 and can afford a 10% down payment. Or a person with a FICO® score of 580 or higher and can afford a 3.5% down payment. In either case, you must be able to provide evidence of stable employment historyFederal Housing Administration (FHA) Loans
A U.S. citizen or legal permanent resident who: 
Has a FICO® score of 640 or higher
Has stable income
Lives in a USDA eligible area 
U.S. Department of Agriculture (USDA) Loans
A law enforcement officer, teacher, firefighter or EMT who commits to making the new home the principal residence for at least 36 monthsDepartment of Housing and Urban Development (HUD) Good Neighbor Next Door Program
A person looking for a loan that doesn’t exceed the Federal Housing Finance Agency’s (FHFA’s) loan limits and: 
Has a credit score of at least 620
Can make a down payment of at least 3%
Fannie Mae or Freddie Mac
A home buyer who’s working with an FHA-approved real estate agent and:
Has a credit score of at least 620
Has a maximum loan-to-value (LTV) ratio of 80%
Has a debt-to-income (DTI) ratio of no more than 36% of their gross monthly income
Fannie Mae’s HomePath Ready Buyer™
A person buying or building an energy-efficient home who is willing to get a home energy assessment from an approved assessorEnergy-Efficient Mortgage (EEM)
A person purchasing a home as your primary residence and can occupy it within 60 days of closingFHA Section 203(k) Loans
A Native American who is a veteran or has a spouse who is a veteranNative American Direct Loans

Are You Eligible for a First-Home Loan? How To Qualify

Entering the housing market is exciting, but it requires discipline and a good financial head on your shoulders. While the criteria for state and federal government-backed loans might be more relaxed than the criteria for conventional loans, lenders still want to see that you have a reliable source of income, a decent credit score and a solid debt-to-income (DTI) ratio.

Every loan program has different qualifying requirements and underwriting processes (when lenders do a deep dive into your finances to approve your mortgage), so it’s important to take the time to fully understand your financial health before you dive in. 

Research all of the options that could work for you. Compare costs, interest rates and down payment requirements to get the best deal. 

Take It Step-by-Step

The best approach to buying your first home is to take things slow. It also helps to have a clean, established credit history and a healthy credit score before you begin your search for a mortgage lender. 

Do some research and explore the payment assistance programs that can help you become a homeowner.  

  1. U.S. Department of Labor.History of Changes to the Minimum Wage Law.Retrieved September 2021 from https://www.dol.gov/agencies/whd/minimum-wage/history 

  2. U.S. Department of Housing and Urban Development Archives. “HUD HOC Reference Guide.” Retrieved September 2021 from https://archives.hud.gov/offices/hsg/sfh/ref/sfhp3-02.cfm  

#icymi

In Case You Missed It

Take-aways

  1. First-time home buyers can often access a mortgage with a lower interest rate and/or credit score
  2. Some homeownership programs are exclusively available to first responders and teachers
  3. Veterans may qualify to buy a home with no down payment

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