What Is a First-Time Homebuyer Program?

First-time homebuyer programs are designed to help new homeowners overcome the financial barriers to purchasing a home. These programs can include special loans with low down payment requirements, grants, and other financial assistance. At O1ne Mortgage, we specialize in helping first-time buyers navigate these options to find the best fit for their needs.

Types Of First-Time Homebuyer Programs

Government-Insured Mortgages

Government-backed loans can be an excellent option for first-time homebuyers. Here are some of the most popular types:

• FHA loans: These loans have more lenient borrowing requirements and allow for down payments as low as 3.5%.
• USDA loans: Ideal for low-income rural and suburban homebuyers, these loans offer low interest rates and require no down payment.
• VA loans: Available to service members and veterans, VA loans offer lower interest rates and no down payment.

Low Down Payment Mortgages

Conventional mortgages with low down payment options are also available:

• Fannie Mae Standard 97 Loans: These loans require just a 3% down payment and are available to first-time buyers with good credit.
• Other conventional loans: Some lenders offer loans with 3% to 5% down payments, though credit score requirements may be stricter.

Programs That Offer Discounted Mortgage Rates

Some programs offer reduced mortgage rates for qualifying first-time homebuyers. For example, Fannie Mae’s HomeReady Mortgage is designed for low-income buyers with a 3% down payment and offers lower mortgage rates and reduced insurance costs.

Down Payment Assistance Loans

If you need help with your down payment, consider these options:

• Deferred payment loans: Repayment is deferred until you refinance, sell, or move.
• Low-interest loans: These work like a second mortgage, with immediate repayment.
• Forgivable loans: These interest-free loans are forgiven if you stay in the home for a certain period.

No-Closing-Costs Loans

Some mortgages allow you to fold closing costs into your loan, reducing upfront fees but increasing the overall loan amount. Be sure to read the fine print, as other fees or higher interest rates may apply.

State or Local First-Time Homebuyer Programs

Many states offer programs to help first-time homebuyers with down payments and closing costs. Examples include California’s MyHome Assistance program and Tennessee’s Great Choice Plus program.

Employment-Based Homebuyer Programs

Some employers offer home-buying assistance. The Good Neighbor Next Door program, for example, provides significant discounts to law enforcement, teachers, firefighters, and EMTs who purchase homes in certain areas.

What Is a First-Time Homebuyer Grant?

Unlike loans, grants do not need to be repaid. They provide free money to help you buy your first home. Grants can come from state and local governments or nonprofit organizations.

Types Of First-Time Homebuyer Grants

• Down payment assistance grants: The National Homebuyers Fund offers grants up to 5% of the loan amount for low- and moderate-income buyers.
• Grants for closing costs: Some programs, like Fannie Mae’s HomePath, offer reimbursements for closing costs.
• Grants for home repairs and renovations: Certain grants can be used for home inspections and rehabilitation costs.

How to Qualify for First-Time Homebuyer Benefits

Eligibility criteria vary by program but often include:

• Income: Many programs are designed for low- to moderate-income buyers.
• Residency: State or local programs may require you to be a resident.
• Credit: Most programs require at least a “fair” credit score (580 to 669 for FICO® Score models).
• Employment: Some benefits are reserved for specific professions.

To find specific grants and benefits, start by searching online for first-time homebuyer programs in your state. You can also find resources through the National Council of State Housing Agencies or by connecting with a HUD-approved housing counselor.

Frequently Asked Questions

Do I Qualify as a First-Time Homebuyer?

Generally, you qualify as a first-time homebuyer if you haven’t owned a home in the past three years. Specific criteria may vary by program.

What Credit Score Is Needed for First-Time Homebuyers?

Credit score requirements vary, but most programs require at least a “fair” credit score. For example, FHA loans require a minimum score of 580 for a 3.5% down payment.

What Is the $25,000 First-Time Homebuyer Grant?

The $25,000 First-Time Homebuyer Grant is a proposed federal program that aims to provide substantial financial assistance to first-time homebuyers. Details are still being finalized.

The Bottom Line

First-time homebuyer programs and grants can make the dream of homeownership a reality. With resources available from state and local governments, nonprofit organizations, and certain mortgage lenders, taking the time to apply can be well worth it. A healthy credit score can also make you a more attractive applicant. Start by reviewing your credit report and score.

At O1ne Mortgage, we are committed to helping you find the best first-time homebuyer programs and grants to suit your needs. Call us today at 213-732-3074 to speak with one of our experienced loan officers and take the first step toward owning your dream home.