A Guide to First-Time Home Buyer Programs, Loans, and Grants

A Guide to First-Time Home Buyer Programs, Loans, and Grants

Are you thinking about making the leap into homeownership? Purchasing your first home is an exciting milestone; plenty of programs, loans, and grants are available to help you achieve it. From down payment assistance to low-interest mortgage options, there are various ways to make your first home purchase more accessible. In this blog, we'll explore some of the best first-time home buyer programs, loans, and grants to help you confidently navigate the path to homeownership.

Types of first-time home buyer programs

The good news is that several types of first-time home buyer programs are available that can offer various benefits, such as down payment assistance, low-interest rates, and more. In the following sections, we'll explore some of the most popular types of programs, including grants, loans, and tax credits, to help you find the right fit for your needs.

Down Payment Assistance (DPA)

A down payment is a lump sum of money paid upfront that is a percentage of the total cost of the house. Saving for a down payment can be one of the biggest hurdles first-time home buyers face when purchasing a home. Thankfully, some programs can assist eligible home buyers with their down payment and lessen their financial burden.

DPA programs offer benefits such as lower interest rates, deferred payments, and in some cases, outright grants. There are different types of DPA programs, including grants, second mortgages, and forgivable loans. Knowing their differences helps you determine the best option.

DPA loans 

If you're worried about coming up with a down payment for your first home, some options are available. Down payment assistance programs can be a lifesaver for eligible buyers, and they're often tied to specific loan types. For instance, second mortgages, deferred payment loans, and forgiven loans can help reduce the amount you need to put down. 

Keep in mind that each type of loan has its own repayment structure. Second and primary mortgages have to be paid off simultaneously, while deferred payment loans must be paid in full when you sell or refinance your home. Finally, forgiven loans must be repaid if you move or sell your home before the forgiveness period expires.

DPA grants

You may be eligible for DPA through grants that don't require repayment. Keep in mind that the criteria for DPA grants may vary depending on the program. It's wise to contact your state or local government to get all the information about the first-time buyer down payment assistance programs available to you.

Government-backed loans

Did you know that there are loans backed by the federal government that can help first-time home buyers purchase a home with no down payment? In later sections, we'll dive into the details of these types of loans and show you how you can take advantage of this incredible opportunity to become a homeowner.

Tax deductions

Unfortunately, the $7,500 credit for first-time home buyers under the Housing and Economic Recovery Act has been available since the program ended in 2010. However, you can save on taxes by maximizing available deductions.

You can also deduct the interest cost paid on loan amounts up to the above limits for a primary and one other home, two of the most significant homeownership deductions. Furthermore, additional deductions and credits may be available through your state or local government.

Closing assistance

Closing costs can range from 2-6% of your home loan's total price but don't worry: government-sponsored and private programs can help you cover them. These programs can offer assistance as a grant or loan, similar to down payment assistance. Additionally, sellers can sometimes offer concessions to help with closing costs, such as covering attorney fees, title insurance, and property tax services. They can even help you pay for points upfront, lowering interest rates and contributing to property taxes.

Home buyer education

There are plenty of helpful online educational programs and resources available. A first-time home-buying class is a great option to consider. These classes can be free or low-priced and offer valuable information on the mortgage application, loan options, and the entire buying process. You can easily find these classes by browsing online real estate courses and looking for ones created specifically for first-time home buyers. 

First-time home buyer program FAQs

What is a first-time home buyer? 

Did you know that being a first-time home buyer isn't always as straightforward as it sounds? While most government and nonprofit programs have strict definitions of what constitutes a first-time home buyer, the term can be misleading. 

If you haven't owned any real estate in the past three years, you may be considered a first-time home buyer for specific programs. This means that even if you've purchased a home previously, you could still be eligible for some first-time home buyer programs if you meet the other qualifying criteria.

Who qualifies for first-time home buyer programs?

To be eligible for first-time homeowner benefits, you can't own a rental or investment property, even if you don't live there. Remember that if you choose a government-backed loan like a USDA, VA, or FHA loan, your home must meet certain safety standards before you qualify. 

Local and state government programs usually have income restrictions. Tax deductions and employer-sponsored programs are more flexible. For example, you can deduct mortgage insurance from your primary residence, even if you have other properties. 

Employer-sponsored programs vary by employer and state sponsor. Many use a three-year rule to determine first-time home buyer status. Unsure if you qualify? Speak to a Home Loan Expert at Rocket Mortgage to get personalized guidance.

Help is available if you’re buying a home for the first time

If you're a first-time home buyer, you have many options for financial assistance that can make purchasing a home more attainable. Eligible home buyers can receive assistance from local, state, or federal governments, charities, nonprofits, and employer programs. 

These assistance programs can include help with down payments, closing costs, tax credits, or education. You can find programs that you qualify for by visiting HUD's website. Remember, you cannot have owned property in the last three years to be eligible for these programs.

Work with a qualified Realtor

Are you ready to find your dream home in Alabama? Contact Kristin Bridges today to start your search! With a wide variety of homes for sale in Alabama, Kristin can help you find the perfect fit for your taste and lifestyle. Don't hesitate to reach out and schedule a consultation with Kristin to get started on your home-buying journey.

Work With Kristin

Helping my clients navigate the buying and selling process with the least amount of stress possible is my goal. I recognize the value and trust my clients place in me, and I strive every day to exceed their expectations as their Realtor®.

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