If you or someone you know is trying to become a first-time homeowner, and you don't have a high salary or a lot of savings, there is financial assistance available if you lack a large down-payment or enough money for closing costs.
Over the past decade there has been a surge in first-time homebuyer initiatives designed to give people a helping hand in overcoming the down payment dilemma. In fact, in every state in America there are a broad range of first-time homebuyer assistance programs, including:
Free grants and cash gifts for down payments - with funds ranging from $500 to as much as $40,000
Money for closing costs, prepaid escrows and other mortgage expenses
Grants or loans to fix up homes in need of repair
100% financing programs, so that you pay zero down on a home
Home loans that feature 0% interest, low interest rates or below-market interest rates
Mortgages with loan forgiveness benefits or no payments for a set period of time
Federal and state housing tax credits
Homebuyer workshops to teach you about the rights and responsibilities of being a homeowner
Mortgage education classes that explain the mortgage process
Budgeting, credit counseling, money-management and overall financial planning services
First-Time Homebuyer Programs In Every State
No matter where you reside or where you're looking to settle down, if you're a first-time homebuyer, there's a program that can help you purchase a house. And virtually every type of residence is eligible under these programs, including single-family homes, condominiums, townhouses, modular homes, and manufactured housing. Many assistance programs have income limitations, particularly those that provide city, state or federal funding. But other programs have no income criteria. Also, certain housing assistance plans impose caps on the purchase price of the property you can buy. Despite these restrictions, you'll find that taking advantage of a first-time homebuyers' program is one of the smartest things you can do. It will allow you to get into a home sooner, save money in the process, and simultaneously build wealth.
Even if you've already been successful at saving on your own, I highly recommend that you utilize a first-time homebuyer program for three reasons. First, if you can get down payment assistance, and you combine that money with your own savings, you'll walk into your new home with a greater piece of equity. Second, using funds from a first-time homeowners' initiative can allow you to keep some of your own savings in the bank as cash reserves - rather than depleting all of your money for the down payment and closing costs. Finally, many first-time homebuyer programs have a mandatory homeownership counseling component. Consequently, the knowledge and skills you'll gain from this counseling will make you better-educated and more prepared for homeownership as you make the transition from renter to owner.
Tips To Find Free Money For Homebuyers In Your Area
Google the phrase "first-time homebuyer program" along with your city or state to find programs in your area. You can also pick up a copy of my book, Your First Home, for specific homeowner assistance programs in every state. Your First Home details eight sources of aid you can turn to for financial and educational assistance in buying a home. These eight sources include:
Federal and/or National Programs
State Aid
County Initiatives
Local/Municipal or City Efforts
Non-Profit and Community-Based organizations
Lender-Specific Programs
Programs Based on Your Job or Occupation
Employed Assisted Housing Initiatives
Based on state initiatives alone, here are some examples of various programs for first-time homebuyers, as described in Your First Home:
In New York, if you are a first-time homebuyer getting a home in a targeted area, you can obtain a mortgage at an interest rate as low as 4.625% via the state's "Achieving the Dream Program." With this program, which is through the State of New York Mortgage Association, you also receive a minimum of $5000, or 5% of your mortgage amount, whichever is higher, in order to pay your down payment and closings costs.
In Texas, you can get grant funds up to 5% of your mortgage amount, along with two type of loans with interest rates that are typically 1% below current market rates via the Texas First Time Homebuyers Program. For more information, call the Texas Department of Housing and Community Affairs at 512-475-3800 or toll-free at 800-525-0657.
In Illinois, first-time homebuyers taking place in the Assets Illinois Homeownership Project can receive a dollar for dollar match up to $2,000 to help them save for the purchase of a first home. Funding for these matching contributions in these Individual Development Accounts are provided by the Illinois Department of Human Services. Participants also receive free homeownership counseling and advice on how to avoid predatory lending. For more information, call 312-793-3819.
In South Carolina, the Single Parent Program is open not just to first-time homebuyers, but to any one renting, as long as the person has a child under the age of 18 and the homebuyer is divorced or has been separated for six months. The program offers a forgivable loan up to $5,000, or down payment assistance up to $4,000. For more information, call 803-896-9508.
In California, the High Cost Area Home Purchase Assistance Program (HiCAP) offers up to $7,500 in down payment assistance in the form of a deferred-payment second loan. For more information, call 877-922-5432.
In Georgia, the Dream Homeownership Program offers 100% financing via a low interest rates 30 or 35-year mortgage, and a second loan ranging from $5,000 to $20,000 that can be used for a down payment and closing costs. The down payment assistance loan has no interest, no monthly payments, and no payment is due until the house is sold, refinanced or no longer used as the buyer's primary residence. For more information, call 877-359-4663.
In Pennsylvania, the HOMEstead Down payment and Closing Cost Assistance Loan features up to $20,000 in down payment and closing cost assistance in the form of a no-interest second loan. Funds up to $14,999 are forgiven at 20% per year over five years. Funds between $15,000 and $20,000 are forgiven at 10% per year over a decade. For more information, call 800-822-1174.
In Nevada, you can get up to $10,000 in down payment and closing cost assistance, and a below-market interest rate on 30 and 40-year loans with the Nevada Housing Division First Time Homebuyer Program. For more information, call 702-486-7220.
As you can see, a broad range of programs exist for all potential homebuyers.
By the way, some of you may be wondering: Why would anyone give me money to become a homeowner? The answer boils down to two things. First, experts have long recognized that the biggest obstacle to homeownership in America is that many people lack the savings necessary to cover a down payment and closing costs. Fortunately, many non-profit groups, mortgage lenders, government agencies and businesses alike are willing to provide you with the money you need to get into a home. Additionally, each of these entities has a vested interest in seeing you become a homeowner. After all, when you buy a home, you stake down roots in a community, and you're more likely to care for that neighborhood because you now have a personal interest in seeing it thrive. Homeowners also pay property taxes, supporting the building and development of local schools, highways, hospitals and other needed community services. In addition to invigorating communities and providing a tax base, homeowners patronize neighborhood stores, work at local businesses, volunteer in places of worship, and perform other civic duties
Becoming a first-time homebuyer, therefore, is an exciting and commendable goal. Just make sure you're truly ready for the rights and responsibilities of homeownership.
This article excerpted from Your First Home: The Smart Way to Get It and Keep It, by Lynnette Khalfani-Cox. All rights reserved. For more financial tips and homeownership advice, visit Lynnette's website at: TheMoneyCoach.net TheMoneyCoach.net
Lynnette Khalfani-Cox, The Money Coach?, is a themoneycoach.net Personal Finance Expert, television and radio personality, and the author of numerous books, including the New York Times bestseller Zero Debt: The Ultimate Guide to Financial Freedom.
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