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

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

Choosing to buy a house can be an inspiring decision. However, it's essential to remember that buying a home is a significant financial commitment and requires careful consideration and planning. Before jumping into the home-buying process and looking at properties, first-time buyers should educate themselves on the many paths toward homeownership and ensure they are financially prepared for its long-term commitment. This guide will cover some of the most common options so you can confidently start your home-buying journey.

Types of first-time homebuyer programs

While the costs associated with buying your first home can seem scary, first-time homebuyers should remember that many programs, loans, and grants can make those costs feel much more manageable. They range from federally sponsored to state-sponsored, and some are even employer-sponsored. There are also many charitable and non-profit programs. It’s worth exploring all your options since each help in a different way.

Down payment assistance

One common way to ease the upfront burden of home-buying is through down payment assistance (DPA). DPA is an incredible resource because the upfront cost of a home is often the most significant obstacle for first-time buyers. DPA can be a precious resource by reducing or eliminating this burden. DPA often comes in the form of a loan or grant. Remember that a loan has to be repaid, while a grant does not. However, DPA loans often have better terms than traditional mortgages and may have other perks, like reduced interest or deferred payment.

Closing costs

While many homebuyers are prepared for a down payment, other expenses can cause sticker shock. Closing costs are one of those expenses, and while average closing costs vary by state, they can quickly accrue to thousands of dollars.

However, newbie homebuyers can explore potential options for closing cost assistance. Assistance might come as a grant or loan, but you can also speak to your real estate agent, who can negotiate seller concessions. Along with closing costs, seller concessions often cover other expenses and fees, such as the ones associated with insurance, attorneys, or tax services. That’s why it’s crucial to find an experienced real estate agent like Tracy Shea, who will go to bat for you and get you the best deal possible.

Federal first-time homebuyer programs

On a federal level, several government-sponsored programs aim to assist home buyers with financing their first homes. For example, the Federal Housing Administration (FHA) offers loans to first-time homebuyers with a minimum credit score of 500. FHA loans have more manageable down payment requirements, making them an attractive option for many first-time homebuyers.

Alternatively, take a look at your eligibility and determine if you might qualify for a Veterans Affairs (VA) loan. VA loans typically offer more flexible qualifying criteria and lower interest rates than traditional mortgages.

The last type of government-backed loan is through the United States Department of Agriculture (USDA). They offer loans to buyers in rural areas with low-interest rates and a waived down payment.

Additionally, if you are a teacher, law enforcement officer, firefighter, or EMT, you should investigate The Good Neighbor Next Door program. Buyers who qualify can receive a half-off discount on the listed price of select homes in revitalization areas. Many of those homes are already affordable, and with that half-off discount, this program is an excellent option if you qualify.

Charitable or nonprofit first-time homebuyer programs

In addition to the government-sponsored programs, loans, and grants mentioned earlier, non-profit organizations aid newbie homebuyers. Two such organizations are Habitat for Humanity and Neighborhood Assistance Corporation of America (NACA).

You’ve probably heard of Habitat for Humanity before, and with good reason: they are a widely known non-profit organization helping build homes for families needing housing. Volunteers donate labor and materials, making the houses much more affordable than traditional options. 

The Neighborhood Assistance Corporation of America (NACA) is another non-profit organization that helps eligible homebuyers with low to moderate income. It offers fixed-rate mortgages with no down payment, no closing costs, and no private mortgage insurance. The organization also provides another helpful resource: free financial counseling and education to help buyers become financially stable and prepared for homeownership.

Employee-sponsored first-time homebuyer programs

Employer-sponsored home buyer programs are a type of benefit that some companies offer to their employees. They provide employees with financial assistance and educational resources to help them purchase their first homes. Typically, this kind of program is offered as part of an overall employee benefits package, as it can be a valuable tool for companies to attract (and retain!) top talent.

Common features of these programs include down payment assistance, which might come in the form of a grant to help with the upfront cost of buying a home, as well as low-interest loans, which usually have more favorable terms than traditional mortgages. The employer might also provide valuable educational resources to their employees, such as financial counseling. If you are an employee, see if your employer offers these options.

The bottom line

With the right tools, resources, and mindset, first-time homebuyers can achieve the dream of homeownership and build a foundation for long-term financial stability. It’s clear that there are many options available for assistance, and you might be able to find opportunities for low-interest loans, educational tools, grants, and more. By doing so, you can set yourself up for success and confidently achieve homeownership.

If you want to become a homeowner in the greater Boston area, contact The Tracy Shea Real Estate Team for more information. They specialize in Boston, Charlestown, and South End and enjoy utilizing their tools and resources to navigate homeownership for new homebuyers successfully. Reach Tracy Shea and put her team’s decades of experience to work for you.

*Header photo courtesy of Unsplash

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