First Time Home Buyer Programs

Getting Your First Set of House Keys

First time home buyer programs are often confused with down payment assistance programs. While different they often work together when buying a home.

First time home buyer programs have to do with the mortgage program that you qualify for. Loan parameters included in a first time home buyer program will be the type of mortgage – is it a conventional loan, an FHA home loan, a USDA mortgage – interest rates, fixed or adjustable rates, amount of down payment required.

Every year, the Office of Housing and Urban Development – HUD – provides guidelines and the US Treasury Department sets aside money for first time home buyer programs nationwide. These programs have been going on for years. HUD and the Treasury rely on individual state governments to administer this federal program. As a result all states have some form of first time home buyer program as well as down payment assistance program for respective residents to purchase homes. State housing agencies often refer to these programs as Mortgage Revenue Bond mortgages.

Typical Guidelines For First Time Home Buyer Programs

While each state can set their exact first time home buyer program guidelines the following is a general list of guidelines:

Home buyers must be first time home buyers. A first time buyer is defined as anyone who has not had a homeownership interest in the past three years.
Qualified applicants will typically be low to medium income and will not be allowed to have their income surpass certain income caps. Income caps are generally based on the location of the home per county or census tract.
Qualified properties will typically be priced under certain price caps based on the location of the home per county or census tract.
In cases where the home buyer is buying in certain federally designated area economic development areas income cap and purchase price caps may be waived, as well as the first time home buyer requirement.
If you are interested in a state administered first time home buyer program you will need to apply for it generally through an approved mortgage lender or HUD approved non-profit housing counseling agency.
You must intend to live in the home. Except in very limited cases, investment properties are not permitted.

Special Loan Characteristics of First Time Home Buyer Programs

Interest rates for most first time home buyer programs are often at least 1% below market. For example, if the going rate is 5.5%, your interest rate in a first time home buyer program may be 4.5%.
There typically no pre-payment penalties. This means that if you pay your mortgage off early you can do so without penalty.
Generally, credit underwriting is a little more lenient with less than perfect credit home buyers as the home buyer must in many cases attend home buyer education classes.
Mortgage programs are a little more lenient on the source of the down payment and closing costs but almost all require the home buyer to have at least $100-$1000 of their own money to participate and qualify for the program.

Special First Time Home Buyer Programs

Many states have additional home buyer programs for those home buyers who have special needs or needs that fit outside a normal mortgage program.

Veterans and spouses of deceased Vets
Disabled home buyers or home buyers with a disabled person in their care. This program can include additional loan money to make physical changes to the home to accommodate the needs of the disable person.
Public servants like police, fire fighters, EMT’s, Teachers
City employees who live within certain distances of their workplace
Rehabilitation loans for homes that need physical repair or upgrade
Homes located in rural areas
Energy efficient upgrades to made during or shortly after the home is purchased

Beyond these programs, you may live in a metropolitan area that has additional first time home buyer programs. Be sure to check with your loan officer at your state approved mortgage lender about specific programs in your area.

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