7 First-Time Homebuyer Assistance Programs That Can Help You Buy A House

7 First-Time Homebuyer Assistance Programs That Can Help You Buy A House

Prakash Pandey

by Prakash Pandey
Contributing Writer

Updated October 9, 2020
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7 First-Time Homebuyer Assistance Programs That Can Help You Buy A House

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If you are a first-time homebuyer seeking assistance, here are seven programs that can help you realize the dream of owning a home.

Owning a home has always been considered a cornerstone of the American Dream for generations. Still, the recent increase in property prices and higher living costs makes it difficult for many to buy their first home.

According to a Bankrate survey, at least one out of three Americans are not sure whether they'll ever be able to save enough funds for a down payment or closing costs of a house. Combined that with the growing median age of first-time homebuyers (33 years), there is growing concern among experts about the importance the next generation will place on homeownership.

If you are a first-time homebuyer seeking assistance in down payment, here are seven programs that can help you realize your dream of owning a home.

FHA Loan

The Federal Housing Administration provides FHA loans to borrowers with less than optimal credit score and smaller down payments.

With an FHA loan, a first-time homebuyer with a credit score of at least 580 can buy a new house by putting down as little as 3.5% towards the house. Those with a credit score between 500 and 579 can still qualify for the program with a 10% down payment.

One requirement to consider is that FHA loans require the homebuyer to purchase private mortgage insurance for lender protection. That said, traditional loans often have the same requirement unless a sizable down payment is provided.

USDA Loan

The U.S. Department of Agriculture (USDA) offers 100% financing for eligible rural area properties – which means you do not have to put any money down. These loans are designed to provide financial assistance to households with low to moderate-income. You'll need a credit score of 680 or higher, along with income proof, to qualify for the program.

Good Neighbor Next Door Program

The U.S. Department of Housing and Urban Development (HUD) runs the Good Neighbor Next Door program to provide affordable housing to essential professionals, including teachers, firefighters, law enforcement officers, and emergency medical technicians.

The only catch is that qualifying properties are usually located in "revitalization areas." The program offers up to 50% discount on the purchase price of these houses.

Veterans Administration (VA) Loan

Veteran Administration loans are offered to active duty personnel, veterans, and their spouses.

VA loans are available at below-market interest rates and do not require private mortgage insurance or stringent credit requirements. These loans offer 100% financing for homebuyers, although they may involve a funding fee, which can be included in the overall loan amount.

Fannie Mae and Freddie Mac

Fannie Mae and Freddie Mac garnered a bad reputation after their bailout in the 2008 recession. Still, these government-backed organizations are perfect for first-time homebuyers with good credit seeking down payment assistance.

You'll need a credit score of 620 or higher and an impeccable credit history to qualify for this program. Once approved, you can purchase a home by putting down only 3%, although you'll have to buy private mortgage insurance unless your down payment is significantly higher.

National Homebuyers Fund

The National Homebuyers Fund is a multi-state grant program that covers up to 5% of the overall loan amount for eligible candidates. You must utilize a loan from a participating lender to qualify for the NHF. It is important to note that the NHF grant can be combined with FHA loans, VA loans, USDA loans, or any conventional financing program.

State-run First Time Home Buyer Grants

In addition to the above assistance programs, you can check the down payment grants offered by your state's housing authority. The primary intent behind these grants is to promote housing in particular geographic areas or for specific professions.

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