There are many ways to finance your first home. How do you decide which option is best? We’ve put together the following guide for this purpose expressly to help you navigate the countless home financing options. Whichever option you choose, our goal is to do all we can to ensure your experience as a first-time homebuyer is a good one.

FIRST-TIME BUYER FINANCING PROGRAMS

Down Payment Assistance (DPA)

DPA loans are available to help cover the cost of the down payment. Down payments are usually the most expensive part of the purchase for buyers. Most programs will qualify you as an eligible applicant as long as you haven’t owned any type of home in the three years preceding your purchase. The following are the two best types of DPAs:

DPA Loans

• Forgivable Mortgage Loans – Also known as second mortgage loans, these loans give you the option not to pay them back as long as you remain in good financial standing and in the home for a set number of years. They have a 0% interest rate.
• Deferred Payment Loans – You won’t have to repay these second mortgages until you move, refinance, or sell your current home. Repayment begins when you pay off your first loan.

DPA Grants

There are a number of grants that offer down payment assistance.  Generally, these grants do not require repayment. Government grants include tax deductions like the ones described below.

Government-backed Loans

Loans from the Federal Housing Administration (FHA) can provide buyers with lower credit ratings to reduce the interest rate on their loan as well as their closing costs. You can also apply for loans covered by your state.

Tax Deductions

Contact your tax professional, attorney, or real estate agent to get more information about the property tax deductions you can make on your yearly taxes. If the value of your home and vacation home add up to less than $750,000 ($375,000 if filing separately), you can deduct the entire amount of your loan insurance.

Closing Costs Assistance

Total closing costs on a first-home purchase generally run from 2% – 5%, though sometimes it can be more. Ask your real estate professional for guidance on how to apply for these loans. Long term, these loans may positively and significantly impact your financial health.

Homebuyer Education

If you are a first-time homebuyer, it may be worthwhile to register for an in-person or virtual class that presents the do’s and don’ts of buying a home. Many of these classes are free or available for a nominal fee.

FEDERAL FIRST-TIME BUYER PROGRAMS

Many first-time buyers discover their credit score is lower than they had hoped it would be. Federally backed programs may offer assistance if you find yourself in this situation.

Government-Backed Loans

The most common loans you can apply for come from the FHA, but there are also loans available from the Veterans Administration (VA) as well as the United States Department of Agriculture (USDA). USDA loans can help if you are considering buying property in rural or suburban areas. The VA offers different loan programs to anyone who is or has been a member of the armed forces, including surviving spouses.

Good Neighbor Next Door

Good neighbor next door buyers may be eligible for an additional number of lending programs. Elementary, middle, and high school teachers, and first responders such as police officers, firefighters, and medical personnel, among others, are eligible for these loan programs. The available assistance can equal up to half the price of HUD housing.

STATE AND LOCAL FIRST-TIME BUYER PROGRAMS

In addition to the federally-backed loan assistance programs, make sure to check out your state and any local government assistance programs.

CHARITABLE AND NONPROFIT FIRST-TIME BUYER PROGRAMS

Charities and nonprofit organizations may also be a source of loan assistance or funding for first-time buyers.

Habitat for Humanity

Since 1976, Habitat for Humanity has provided affordable housing for many in need. Their volunteer corps help to build homes all across the country. To date, they’ve built over 820,000.

Neighborhood Assistance Corporation of America (NACA)

NACA assists those with unstable incomes to find quality counseling and education resources to help them on their journey to purchase their first home. Applicants do not need to meet a down payment requirement, nor do they need to cover closing costs. NACA also offers loans.

EMPLOYER-SPONSORED FIRST-TIME BUYER PROGRAMS

Employers may offer first-time buyers resources and programs to help offset costs which may include lowering the down payment, eliminating closing costs, and offering grants. We recommend you speak with your Human Resources team for more information.

FIRST-TIME BUYER LOANS AND GRANTS FOR STUDENTS

Whether you are currently a student or have graduated, if you have a student loan, it is recommended you check out the VA and the FHA to find out if you qualify for applicable mortgage loans and grants programs. These are designed with more flexible requirements and take into consideration your student loan amount.

IN CONCLUSION, HELP IS AVAILABLE FOR FIRST-TIME BUYERS

Our goal at The Oscar Puig team is that you become a knowledgeable buyer and know there are a great number of resources available. Besides banks, make sure to do your homework and look for assistance with non-profits, employers, federal, state, and local governments, and federal agencies, to name a few. And, absolutely contact us with any questions or for assistance.