First-Time Homebuyers: How To Get Help With Your Down Payment

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first-time homebuyer down payment assistance

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Are your first-time homebuyer dreams on hold because of down payment woes?

You’re not alone.

According to a recent survey from Zillow, a majority of Americans (66 percent) still believe buying a home is an essential milestone in achieving the American Dream. However, two-thirds of renters say saving up a down payment was a barrier to homeownership.

If you’re in that boat, you may not have to put off buying a home. If you qualify, first-time homebuyer down payment assistance programs can help you.

What are first-time homebuyer down payment assistance programs?

A first-time homebuyers program — as the name implies — focuses on getting you into your first home, often with some sort of down payment assistance.

Dan Green, a 14-year veteran of the mortgage industry, founded the site Growella to help millennials navigate their finances. He said that a down payment assistance program is usually government-backed and administered at the local level.

Some of the ways in which down payment assistance programs can help you include:

  • Grants to help with your down payment — no repayment required
  • Mortgage interest rate reductions on your home loan
  • Down payment loans at rates below current market levels
  • Closing-cost reimbursements for your mortgage
  • Tax-bill reductions at the federal and local levels

According to Green, there are hundreds of these programs available. In many cases, finding one to help you is just a matter of searching.

Where to find down payment assistance

Because so many first-time homebuyer programs are administered locally, that’s a good place to start.

“Buyers should check their local county or city website for more information on programs,” said Randall Yates, a 15-year veteran of the credit and mortgage industries, and the founder and CEO of mortgage comparison website The Lenders Network.

Using a general search engine like Google can help you get to those local government pages a little faster. Enter the name of your city or county, and add “first-time homebuyer down payment assistance.” Once you have the results, you can check specific program requirements.

Yates also suggested using the HUD website to find homebuyer programs by state.

Another resource for locating down payment assistance programs is Down Payment Resource. By entering basic information about where you want to buy, your household income, and special circumstances, you instantly see all the homebuyer programs you qualify for.

Who qualifies for first-time homebuyer programs?

For the most part, eligibility for down payment assistance is determined by the rules of the program. Yates points out that there are usually a few common requirements to meet to qualify for first-time homebuyer loans, grants, and other programs:

  • Minimum FICO score of 620
  • Use of the home as a primary residence
  • Agreeing to stay in the home for a minimum period of time
  • Completing a homebuyer or financial education course

In some cases, you don’t even truly have to be a first-time homebuyer to qualify. If you have been renting for three to five years (depending on the program), you might be considered a “first-timer” for the purposes of the down payment assistance program.

Some down payment assistance programs for first-time homebuyers focus on income, among other eligibility requirements, according to Margie Green, a loan originator with Town Square Mortgage.

She pointed out that some of these programs require you to show financial need and have limits on how large your income can be to qualify. Plus, there might also be maximum fund requirements for your bank accounts.

The idea is to provide help to first-time homebuyers who most need it. However, even with a down payment assistance program designed to help those with income needs, you will still need to prove you can make regular mortgage payments.

Finally, once you find a program you think you qualify for, you should look for a lender that can actually help. “Contact your local lender to ensure they are registered to originate the program you’re interested in,” Margie suggested.

When to choose first-time homebuyer down payment assistance

Down payment assistance programs aren’t always necessary to afford a home. Even though we get hung up on the idea of putting 20 percent down, there are plenty of lenders that will qualify you for a mortgage with a lower down payment.

If you qualify for an FHA loan, you might only need to put down 3.5 percent. Fannie Mae’s HomeReady program only requires three percent down from eligible buyers.

Plus, if you qualify for a VA loan (for veterans) or USDA loan (for rural borrowers), you might not need to put anything down at all. (For more information, check out our article on programs for buyers with low down payments.)

First-time homebuyer programs work best for buyers who may have a hard time affording a down payment of any size and who don’t meet the requirements for no-down-payment programs offered by the government.

Talk to a mortgage broker about your options. A first-time homebuyer program might not be necessary. On top of that, you might qualify for a combination of programs that can make getting into a home even more affordable.

If homeownership is your goal, and you have good credit and an adequate income, you can probably find a program that matches your needs.

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