A Guide To First-Time Home Buyer Programs, Loans And Grants

Buying one’s first home can be an understandably overwhelming experience. Not only is the search for the perfect property time-consuming, but navigating the complicated world of financing can be frustrating. Fortunately, there are a number of first-time home buyer programs that can help make buying a home easier. There are different types of programs available, depending on qualifications and needs.

One of the first and biggest challenges when it comes to buying a home is the down payment. The good news is, many programs can help with down payment assistance. Here are two common types:

DPA loans are designed specifically to help first-time home buyers with their down payments. These loans tend to be provided by state and local governments, and by private lenders. DPA loans usually feature low interest rates and flexible terms of repayment, making them a great resource for many first-time buyers.

DPA grants are government — or other organization-provided funds — that help first-time buyers come up with a down payment. Unlike traditional loans, these grants do not need to be paid back. DPA grants are a helpful option for people who may not qualify for a loan, or who prefer not to take on additional debt.

Another helpful option for the discerning first-time home buyer is a government-backed loan. These loans are guaranteed by the government itself, which usually makes lenders more willing to do business with borrowers who may not qualify for conventional loans. Here are some types of government-backed loans that are commonly used:

These loans are backed by the Federal Housing Administration (FHA) and were created to assist first-time home buyers with more limited credit or who have a smaller down payment. FHA loans usually require a smaller down payment than conventional loans, which makes them a popular choice for many first-time buyers.

VA loans are backed by the Department of Veterans Affairs and can be used by current and former members of the United States military. These loans often offer lower interest rates and more flexible terms for repayment than conventional loans.

The United States Department of Agriculture backs USDA loans, which were designed to assist first-time home buyers in rural areas who may not have much money to put toward a down payment.

When purchasing a home, many Americans are eligible for certain tax deductions. These deductions help reduce buyers’ total tax liability and make owning a home more affordable. Here are some types of tax deductions available to a first-time home buyer:

The mortgage interest deduction allows a homeowner to deduct any interest paid on a mortgage from their total taxable income. This can result in hefty savings, especially during the first few years of a mortgage, when the majority of payments go toward interest.

Property tax deductions allow homeowners to deduct property taxes paid on the home from their overall taxable income. This can save homeowners a lot of money, especially in areas with particularly high property taxes.

Closing costs tend to add up quickly when buying a home. However, there are ways to help cover these costs and bring the total cost back down.

In some cases, sellers may be willing to put money toward closing costs as a portion of the purchase agreement. This brings down the amount of money a buyer needs to bring the deal to closing.

In many towns and states, governments provide financial assistance for closing costs through local programs. These kinds of programs can vary by state or town, so it’s helpful to check with local housing authorities for location-specific information.

In addition to the programs mentioned previously, there are also other federal programs available to buyers. These programs were implemented to help make home ownership more accessible to people buying their first homes.

As discussed earlier, government-backed loans like FHA and VA loans are an option for first-time buyers who qualify. Lower down payment requirements and flexible credit guidelines make these loans appealing options.

Offered by the United States Department of Housing and Urban Development (HUD), the Good Neighbor Next Door program offers an incredible 50% discount on the listing price of houses in specified areas of revitalization for teachers, law enforcement officers, and some other eligible professionals.

In addition to federally provided programs, there are also programs for first-time home buyers offered at the local level. The specifics of these programs vary by place, but usually encompass down payment and closing cost assistance as well as home buyer education.

Some private employers provide first-time home buyer programs for their employees as a benefit. Employers may choose to offer down payment or closing cost assistance and may offer other financial incentives, depending on the employer and benefits package.

Some colleges and universities help buyers who are also students with loans and grants that are available specifically for them. Some local and state governments also have programs that assist students in buying homes.

While buying a home for the first time can be intimidating, there are so many programs available to make the process easier and less costly. From down payment assistance to educational programs, there are numerous resources available to help people achieve their dreams of homeownership. Researching all available options including federal, state, and local programs, in addition to nonprofit and employer-sponsored programs, will help buyers come up with a plan that works for them.

In addition to making the most of these programs, it's also critical to work with a trusted real estate agent who can guide buyers through the home-buying process and assist in making informed decisions. Tanya Starkel provides support and resources that make the process smooth and less stressful for first-time buyers, so they can focus on achieving their goal of owning a home.