Buying your first home can be overwhelming in many ways. There are so many decisions to make an many people do not realize that there are home buying grants available in all 50 states. One of the most important of course is getting approved for a mortgage and saving up for a down payment. The down payment as well as closing costs are often the two biggest things that make buying a first home so challenging. Without any equity to bring to the closing table, most people need to just save up the money to get the deal closed.
How hard is buying a first home? Statistics suggest that 80% of millennial renters want to buy their first home but say they cannot afford it. But what they may not know is that there are many first-time home buyer credit programs and grants available for those who qualify. You may be able to qualify for one of these programs so that you can afford to buy a home faster than you thought.
#1 Good Neighbor Next Door
The Good Neighbor Next Door program that is sponsored by HUD offers help in buying a first home to people who work in law enforcement, firefighting, teaching and the EMT field. This program allows the buyer to get a discount on the property as high as 50% off the listed price. The homes are located in HUD-designated revitalization areas.
Many of these homes are available for a $100 down payment if you are using FHA-mortgage financing. You would have to put more money down if you used conventional financing, so FHA lending is highly recommended for this program.
By using the HUD website, you can look for properties that are eligible in your area. A requirement for the program is that you will live in the home for at least three years. Note that these homes are only listed for seven days so it is important to act quickly.
A big plus of this program is that if you sell the home after three years, you get to keep all of the profits and equity for yourself. You do not have to pay back HUD.
#2 Dollar Homes
HUD does offer some fixer upper homes for as little as a dollar. These are homes that are picked up by FHA through the foreclosure process. Of course, this is a small number of houses. The last time we checked on the site, there were only a few homes. There also will be homes listed on this site for a few thousand dollars. If you consider a home on this list, it is important to have it carefully reviewed by a home inspector.
#3 Native American Direct Loan
For the last 25 years, the Native American Veteran Direct Loan program has assisted veterans who are of Native American descent as well as their spouses to purchase homes on federal trust lands. The VA is the lender.
If you and your spouse are eligible, you do not have to make a down payment at all or pay for private mortgage insurance. This is not a grant program per SE, but those who qualify can get no-money down mortgage loan, so this program is a huge benefit for the qualifying first-time buyer. Other benefits include lower closing costs, low interest 30-year, fixed rate loan, and the ability to reuse the benefit more than once.
#4 State Specific Grant Programs
There are many other grant programs available in the US for first time home buyers, but many of them are specific to the state. For example, in Texas, there is the Homes for Texas Heroes Loan Program. This program offers buyer assistance for police, teachers and correctional officers. It also may be used by firefighters, veterans and EMS personnel.
The program may feature these benefits for first time home buyers:
- Down payment assistance of up to 5% of the loan amount
- Do not have to be a first-time home buyer to qualify
- Do not have to live in the home for a certain time period
- The down payment help does not have to be repaid
- The loan is a 30-year fixed rate mortgage in many cases, but other options are available
This program also may be available to other buyers who have low to moderate incomes.
This Texas program also offers eligible buyers a Mortgage Credit Certificate or MCC. Those who qualify for the above program may get their MCC for free – a $500 value. The MCC comes with these very attractive benefits for heroes in Texas who qualify:
- Save as much as $2,000 per year as a special tax credit based upon the mortgage interest you paid. This can save you thousands of dollars over the life of the loan.
- You have to be a first-time home buyer to quality, which means you have not bought a home in the last three years
- No minimum credit score is required
- This certificate can be used with the down payment assistance program above
If you are considering a state or local home buying assistance program, it is important to note if the assistance is a grant or a loan. Some of these down-payment assistance programs will require you to pay back the money over time.
Another issue to consider is called tax recapture. Some programs feature a recapture tax if you sell the home at a profit before a certain number of years go by. So, if you get some gains from the home’s increased value, you could get taxed to make up for the break you got when you purchased.