Money issues often stand in the way of home ownership. A survey by rental service Apartment List found that 80 percent of millennial renters want to buy a home, but most say they can’t afford to.
What you may not realize is that many first-time home buyer programs and grants offer financial help, and you may be eligible for various types of assistance.
Here are nine first-time home buyer programs and grants designed to help you land a great mortgage and get a place of your own.
1. FHA LOAN
In an FHA loan, the Federal Housing Administration insures the mortgage. The FHA is an agency within the U.S. Department of Housing and Urban Development (HUD). The FHA’s backing offers lenders a layer of protection, meaning that your lender won’t experience a loss if you default on the mortgage. FHA loans typically come with competitive interest rates, smaller down payments and lower closing costs than conventional loans.
2. USDA LOAN
The U.S. Department of Agriculture (USDA) has a home buyer assistance program. The USDA guarantees the home loan, there may be no down payment required, and the loan payments are fixed.
Applicants with a credit score of 640 or higher typically get streamlined processing. With a credit score below 640, you still can qualify for a USDA loan, but the lender will ask for extra documentation about your payment history.
3. VA LOAN
The U.S. Department of Veterans Affairs (VA) helps active-duty military members, veterans and surviving spouses buy homes. VA loans come with competitive interest rates and require no down payment. Plus, you aren’t required to pay for private mortgage insurance (PMI), and a minimum credit score isn’t needed for eligibility.
4. GOOD NEIGHBOR NEXT DOOR
The Good Neighbor Next Door program, sponsored by HUD, provides housing aid for law enforcement officers, firefighters, emergency medical technicians and pre-kindergarten through 12th-grade teachers. Through this program, you can receive a discount of 50 percent on a home’s listed price in regions known as “revitalization areas.”
5. FANNIE MAE OR FREDDIE MAC
Fannie Mae and Freddie Mac are government-sponsored entities. They work with local lenders to offer mortgage options that benefit low- and moderate-income families. With the backing of Fannie Mae and Freddie Mac, lenders can offer competitive interest rates and accept down payments as low as 3 percent of the purchase price.
6. ENERGY-EFFICIENT MORTGAGE (EEM)
An energy-efficient, or “green,” mortgage is designed to help you add improvements to your home to make it more environmentally friendly.
The key advantage of this mortgage is that it lets you create an energy-efficient home without having to make a larger down payment. The extra cost is rolled into your primary loan.
7. FHA SECTION 203 (K)
This type of loan, backed by the FHA, takes into consideration the value of the residence after improvements have been made. It then lets you borrow the funds you’ll need to carry out the project and includes them in your main mortgage. The down payment for a 203(k) loan can be as low as 3 percent.
8. NATIVE AMERICAN DIRECT LOAN
Since 1992, the Native American Veteran Direct Loan program has helped Native American veterans and their spouses buy homes on federal trust lands. The VA serves as the lender. If you’re eligible, you won’t be required to make a down payment or pay for private mortgage insurance (PMI). This first-time home buyer loan also offers low closing costs and a 30-year fixed-rate mortgage.
9. LOCAL GRANTS AND PROGRAMS
In addition to the various programs provided by the federal government, many states and cities offer help to first-time home buyers. Before buying a home, check your state’s or community’s website for information on housing grants and programs available in your area.
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