Last Updated on January 31, 2023 by Luke Feldbrugge
Getting to know what first time home buying programs are available, and learning what they can provide you and your family is a good first step to take before buying your first home. Going through the process of buying your first home can be a bit intimidating. It tends to be a big purchase, with many steps, and typically costs a lot of money. Here we provide a snapshot of different first time home buying programs that may be available to you. As you take this significant step toward owning a home, we want to help you get the most you can, for the least amount of money.
There are many programs that most first time homebuyers are unaware of. Keep scrolling to see what programs can assist you on your journey to buying your first home. Be sure to sign up with Homes for Heroes to learn how we can save you even more on your home buying process.
DPA (Down Payment Assistance) Grants
There are many programs available that will match the amount you put into a savings account. For some DPA grants, you can get down payment assistance, as well as closing cost assistance, up to 5%. This grant never has to be repaid, and you are eligible for FHA, VA, USDA and Conventional loans. If you qualify for a DPA grant, you decrease your home buying costs, and therefore you avoid extra debt.
IDA Programs (Individual Development Accounts)
IDA programs are very similar to DPA Programs in that you are getting down payment assistance. These specific accounts use money you deposit to go towards specific goals like post-secondary education or a down payment on a home. Specific IDA programs get their funding from the state and federal government, and oftentimes offer a match for each of your deposits.
You’ll work with a specialist who will look at your finances and help you start working on them. You meet once every few months to go over goals and possibilities. IDA programs require certain things from you, such as taking a financial education class and a home buying class, both of which are generally free. They help you get on top of your debt and teach you what you need to know about looking for and buying your first house.
Many people struggle to save up for a down payment until after they decide to start looking at potential homes. IDA programs work with you to help you become a better person financially, and they help you buy your first home. Here’s a map of available IDA programs by state.
Common Home Loans for First Time Home Buyers
FHA loans are a great option if your credit is less than stellar. The Federal Housing Administration assures a piece of the loan, so lenders are more willing to widen their requirements for the borrower. With the FHA taking on a portion of the loan, homebuyers can purchase a home with a minimum of 3.5% down payment.
The downside is that the insurance premiums are higher and usually last for the entirety of the loan.
VA loans are for active military service members, surviving spouses, and veterans who are looking to buy a home. If you qualify, you can get the loan without a down payment requirement or mortgage insurance. There are debt and income requirements, and VA lenders might have additional requirements.
USDA loans are available for buyers looking for homes in rural and suburban areas. The Department of Agriculture issues the loans, and a down payment is not required. If you are willing to live outside the city, or if you want to live away from the city, this is a perfect option for you. You’ll save money on your home and can commute to your job if you need to. Keep in mind, there are regional limitations for USDA loans.
There are three USDA home loan programs available.
- One option is loan guarantees, offered by local participating lenders. These USDA options are similar to FHA and VA loans and don’t require high down payments, but your insurance premiums will be higher.
- Direct loans, issued by the USDA, are available for low-income applicants, and depending on your region, can be as low as 1%.
- The third option involves home improvement loans and home improvement grants. These give you the chance to repair and upgrade your home. This means making sure your home is attractive as well as safe and sturdy. This can mean redoing the garden, replacing the windows, or repairing a broken roof. Sometimes, you can get a package deal that includes the purchase of your home as well as money for repairs or upgrades, allowing for up to $27,500 in assistance.
The Good Neighbor Next Door Program
The Good Neighbor Next Door Program is an opportunity for police officers, teachers, EMTs, first responders, and firefighters. The U.S. Department of Housing and Urban Development sponsors this program and gives a 50% discount on individual HUD houses that are in revitalization areas. The hope is that these kinds of neighbors will help bring the area up to its potential.
You are required to live in the home for a minimum of three years, and some renovations may be part of the deal. The houses can be found on the Good Neighbor Next Door website but won’t stick around for very long, so take a look.
The U.S. Department of Housing and Urban Development has many home buying assistance programs, but they also advertise other state-funded programs on their website. There could be several options for you, depending on your location, and many programs can be combined with others, giving you even more opportunities.
First Time Home Buying Programs per State
Each state has different home buying options for first time home buyers. Make sure you know what the program requirements are. Look for interest rates, payback options, and loan requirements. Some home loans are similar to cash loans that lend you money but give you higher interest rates. Your best option is to search for state-funded or government-funded programs.
$3,000 Average Savings for First Time Homebuyers
If you are a teacher, a firefighter, healthcare worker, EMS, law enforcement, or military (active duty, reserved, retired, or veteran) looking for programs that coincide with first time home buying programs, sign up to work with Homes for Heroes and our local real estate and/or mortgage specialists. They help save our heroes an average of $3,000 after closing on their first home.