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Buying your first home isn’t easy. Know that there are plenty of grant and assistance programs that can give you a hand.
Olivia Bernard, a 24-year-old nurse in Atlanta, recently purchased her first home with the help of both a county grant and a grant for nurses.
If you meet certain qualifications, you may be eligible for down payment assistance programs, loans, grants, or other services. These programs are often offered by your state, county, or municipality — and may even allow for buyers who aren’t entirely new to homeownership. Usually, they come with income or asset restrictions, location qualifications, or credit score requirements.
Those who meet the following conditions qualify as first-time home buyers, according to the U.S. Department of Housing and Urban Development (HUD) considerations:
- For exactly three years prior to the date of purchase of the new property, an individual with no ownership in a primary residence, or someone with a spouse who meets this criteria
- An individual who only owned with a former spouse during marriage, but is now a single parent
- A person who had only owned with a former spouse and is now considered a displaced homemaker
- A person who has only owned nonpermanently fixed foundation residences (based on applicable regulations)
- An individual who has only owned a property that could not meet state, local, or model building codes. The property in question also must be deemed unable to be brought into compliance for less than the cost of constructing a permanent structure.
Below, we’ve outlined the most common types of assistance programs that first-time home buyers should know about. We also recommend checking with your state and local housing departments, HUD-approved housing counseling agencies, and your real estate agent to see what’s available in your area.
State and Local First-Time Home Buyer Programs
Your state, county, and city should be the first places to look for first-time home buyers’ assistance. State and local governments often have funds dedicated to down payments or closing costs, either in the form of grants that don’t need to be paid back or low-interest loans where payment is deferred for a number of years.
Many programs have income restrictions and are intended for people with low to moderate incomes, and many require the home to be your primary residence. Each state program is different. They offer a variety of competitive interest rates, down payment assistance, closing cost assistance, or tax credits. Each state has its own loan type qualification. Check your state for more details.
First-Time Home Buyer Programs by State
Federal First-Time Home Buyer Programs
HomePath ReadyBuyer Program
This Fannie Mae program offers first-time home buyers up to 3% closing cost assistance on eligible homes (foreclosed Fannie Mae properties). You must take a required online home-buying education course before submitting an initial offer.
Good Neighbor Next Door
Intended for teachers, firefighters, emergency medical technicians, and law enforcement, this HUD program offers a 50% discount on the list price of eligible homes, as long as you live on the property as your sole residence for 36 months.
Insured by the Federal Housing Administration, an FHA loan is a mortgage issued by an FHA-approved lender intended for borrowers with low to moderate income. This type of loan allows for a small down payment (as low as 3.5%, as of June 2020) and lower credit requirements (580 or above) than most conventional loans. If your credit score ranges between 500 and 579, you can still get an FHA loan with a 10% down payment. The downside is that you’ll have to pay private mortgage insurance, meaning higher monthly payments, since your down payment is less than 20% of the home value.
Those looking to buy in certain rural areas may be eligible for a loan from the U.S. Department of Agriculture. USDA loans are guaranteed loans that offer 100% financing (meaning, no down payment) to households with low to moderate income that purchase homes in eligible areas. USDA loans are offered by nationally approved lenders and typically require credit scores of 640 or higher. If your credit score is lower than 640, you may need to provide additional rent and utility payment history documentation.
Veterans and active military are eligible for loans through the U.S. Department of Veterans Affairs (VA). VA loans are offered by private lenders and come with lower interest rates. Oftentimes, down payments and private mortgage insurance are not required.
If you’re a veteran and you or your spouse are Native American, you can receive a loan to purchase, build, or improve a home on federal trust land through the VA’s Native American Direct Loan. A NADL loan requires no down payment or PMI and reduces closing costs.
Fannie Mae and Freddie Mac loans
Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) are government-sponsored enterprises that buy loans from lenders, package them into mortgage-backed securities, and use the sale of the investment to offer lower interest rates for more Americans. A loan from either requires a minimum 3% down payment, a minimum 620 credit score (for some lenders, it may be higher), and a strong credit history.
Assistance by Career or Industry
Depending on your profession, you may be eligible for private and public programs that help you with your down payment. For example, Nurse Next Door and Teacher Next Door offer down payment assistance and grants to nurses, teachers, law enforcement, firefighters, military, and government employees.