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First Time Home Buyers Program – Loans, Mortgages, and Down Payment

Posted by Sellect Realty on January 17, 2017
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Buying a home is a dream for all of us, and we work tirelessly to turn that dream into reality. Some of us can achieve this, others often fail. The main reason behind the failure is a weak financial condition or just lack of knowledge about the programs that help us buy a home. If you are also on a house hunt and looking for best first time home buyers program regarding mortgage and down payment assistance, this article will provide you information about everything that you are looking for.

In this article, you will learn:

  • What Is Mortgage Loan?
  • What Is Down Payment With Regard To Buying A House?
  • How much down payment for first time home buyers?
  • Best Mortgage Programs for First Time Home Buyers (FHA, VA, USDA, Conventional, Home Ready).
  • Down Payment Assistance Program for First Time Home Buyers (NHF, OHFA, Maryland Down Payment Assistance Program).
  • Government Grants for First Time Home Buyers.

But first, we will start by knowing what the terms ‘mortgage’ and ‘down payment’ really mean.

 

What is Mortgage Loan?

“Mortgage is a legal agreement by which a particular amount of loan is granted to a first time home buyer for a given period. Failing to return borrowed amount in the agreed period results in the foreclosure of the property, and the ownership goes to the mortgage lender.”

What Is Down Payment With Regards To Buying A House?

“Down payment is the amount that is paid to the seller from your wallet. Rest of the amount comes from the mortgage you borrowed.”

first time home buyer down payment assistance program

Image Courtesy: Daily Hive

 

 How Much Down Payment for First Time Home Buyers?

There is not an exact percentage for how much down payment for first time home buyer. Generally, it varies between 3%-20%, while 20 percent is considered to be the ideal amount.

Furthermore, the more you make, the less amount of loan you will borrow.

For example, a down payment of 3% ($3,000) on a $100,000 home would mean you are going to borrow $97,000.00.

On the other hand, a down payment of 20% on the same house will see you borrow as low as $80,000, as $20,000 of the amount has already been paid.

However, if you are running on a tight budget and your finances won’t allow you to pay bigger sums, here are some of the best loan programs for first time home buyers that offer loans on low or now down payment.

Best First Time Home Buyers Program – Mortgage Options:

FHA

First one on our list is Federal Housing Authority loan. This first time home buyers program provide loans for as low as 3.5% down payment.

The requirements of “FHA loan program for first time home buyers” are.

How to Qualify for FHA?

The requirements for FHA loan include:

  • A credit score of 580 or above.
  • First time home buyers must pay at least 3.5% to qualify for the credit.
  • Buyers must have a stable employment history or worked for the same firm for 2 or more years.
  • Buyers must be legal US residents, have a social security number and must be of legal age.

An important thing to remember here is that first time home buyers with bad credit (below 580) may also apply for the loan.

However, the down payment amount goes up to 10% for them to qualify.

best mortgage lenders for first time buyers

 

Furthermore, buyers with a credit score of below 500 are not eligible for this loan.

Advantages of FHA:

  • One of the easiest to qualify.
  • Low down payment required.
  • Low credit score (above 500) required.
  • Buyers who have previously undergone a bankruptcy or foreclosure may still qualify for the loan.

VA Loan:

VA (Veterans Affairs) is for veterans of US military and their surviving spouses. This loan programs offers zero down payment option and is provided by private banks and lenders.

How Do You Qualify For A VA Loan?

The eligibility for VA loan includes:

  • Active service of 90 consecutive days during wartime.
  • Active duty of at least 181 days during peacetime.
  • Service of 6 or more years in National Guards or Reserves.
  • You must be a spouse of an ex-military man who died during duty or carries a disability that he received during service.

Meeting any of the above requirement qualifies you straight to get the loan.

What are the advantages of VA Mortgage Loan?

Here are some of the major benefits of opting for VA loan program.

  • No down payment.
  • No private mortgage insurance (PMI).
  • Borrowers with a history of foreclosure and bankruptcy may also qualify.

 

USDA Loan:

This loan program is backed by US department of agriculture. It is one of the rarest first time home buyers program that require zero down payments to qualify for the loan.

How to Qualify USDA Home Loan?

To qualify USDA home loan, following criteria must be fulfilled.

  • Credit score of at least 620 or above.
  • No previous bankruptcies or foreclosures.
  • The borrower must be looking for a property in a rural or suburban area as this loan is not applicable for urban properties.
  • Borrowers must have an income up to 115% of the median income of their respective area.

Benefits of USDA Loan Program:

  • It provides you a mortgage with 100% financing (zero down payment).
  • No limits on the purchase price. The limit is determined by the first time home buyer’s debt to income ratio.
  • Renovation and repair costs can be included in the actual loan amount.
  • Gifted funds (only from blood relatives) are also acceptable.

 

Conventional 97 Program:

Conventional 97 mortgage program is backed by Fannie Mae (the entity that constitutes Federal Housing Financing Agency). This loan program is designed for low-income class and provides a loan for as low as 3% down payment.

How to Qualify For Conventional 97 Loan?

  • 3% down payment.
  • Minimum credit score of 620 is required.
  • The property must be the primary residence of the owner.
  • The desired property must be a single family home, Co-op, Condo or a PUD.
  • The loan amount cannot exceed $417,000.00.

These are some of the best first time home buyers program that provide a mortgage for low or no down payment.

But sometime, even a down payment of just 3% becomes a distant dream as most buyers fail to gather the finances required to pay this amount.

According to a recent survey, more than 70% buyers are unaware of the existence of first time home buyers programs for down payment assistance.

DPA programs assist in making a down payment that is required to qualify for a loan program, such as FHA, VA, USDA, etc.

Each state has different programs for the locals to help them out with the purchase. Down below are some of the DPA programs for first time home buyers.

 

First Time Home Buyers Down Payment Assistance Programs:

Maryland Down Payment Assistance:

Maryland Down Payment Assistance Program is an additional loan program of Maryland Mortgage Program. Anyone who qualifies for the mortgage program can qualify for MDPAP as well.

The Down Payment Assistance for first time home buyer through this program cannot exceed $5,000, and it is a deferred loan.

First Time Home Buyer Down Payment Assistanc Program

“A deferred loan only requires you to pay back the principal amount (no interest) upon the completion of the payment of a mortgage program.”

Eligibility For Maryland Mortgage Program:

  • Applicants must be first-time home buyers.
  • The property must be the primary residence for the applicants.
  • The first time home buyer loan program requires you to take education classes before the purchase.
  • Potential first time home buyers must liquefy 20% of their assets to qualify for the loan. Otherwise, sale prices would be restricted.

NHF (National Homebuyers Fund)

This down payment assistance program provides non-repayable grants for the first time home buyers as well as the experienced buyers.

Here are some of the key features of NHF:

  • Maximum grant of up to 5% of the borrowed money.
  • You will never have to pay back the DPA grant.
  • Comfortable interest rates.
  • A vast variety of grant levels.
  • Different loan options (FHA, VA, USDA, etc.).

 

OHFA (Ohio Housing Finance Agency)

OHFA provides closing costs and down payment assistance for first-time home buyers. Here are some of the key features of OHFA.

  • 30 year fixed rate loan (VA, FHA, USDA).
  • Designed for low-income class.
  • You have the choice to choose 2.5% or 5% down payment of the home price.
  • DPA is forgiven after seven years.

How to qualify OHFA?

  • You have not owned a residence in last three years.
  • A credit score of 640 or higher.
  • Borrowers must have a signed purchase agreement.
  • The property (single family, condos, and duplexes) must be limited to 2 acres.

Now that you have read everything about first time home buyer mortgage programs and down payment assistance, here is a list of some of the government grants for first time home buyers.

 

Government Grants For First Time Home Buyers:

Apart from private banks and mortgage lenders, there are several programs on the government level to make the home ownership accessible to everyone.

Some of the most common first time home buyers grants are:

US Department Of Housing And Urban Development:

Department of Housing and Urban Development provides $10 billion under the act of The American Recovery and Reinvestment 2009.

However, this government grant is provided to the state governments and organizations and not directly to the individuals.

If you are looking for some financial help, gather all the information about the groups that receive these government grants for first time home buyers, and get in touch with them.

The Home Investment Partnership Program:

These grants are also provided to the states to help low-income folks with their rental costs and provide down payment assistance to first-time home buyers.

The assistance comes in the form of a loan, but after a particular amount of time, it is forgiven. So it’s more like a grant.

State Housing Finance Agencies (HFA):

Almost every state has a State Housing Finance Agency, and they can be found quite easily on the internet. Just type ‘state housing finance agency’ along with the name of your city and the several names will pop up.

These agencies provide counseling and explain which first time home buyers program suits you the best.

Conclusion:

Buying a home is going to be the biggest investment of your life. But gathering the finances to support the purchase can be grueling at times, especially the home price.

To make it easier and more affordable, there are several first time home buyer programs that provide down payment assistance and mortgages to make the home ownership accessible to you.

So go through the market and do a complete survey before opting for one.

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