State Programs Provide Assistance for First-Time Homebuyers

Dan rafter
Written by
Dan Rafter
Read Time: 5 minutes

The thing about being a first-time homebuyer is you only get to do it one time. Buying your first home happens just once, giving you the chance to take advantage of lending programs meant to help people buy their first home with low down payments and low credit scores, such as an FHA loan.

Federal assistance is available, but financial help to buy a home is also available from state and local governments, and from private agencies. That’s a big area to search, especially if it’s your first time buying a home and everything is new to you.

And while you're only a first-time homebuyer once, former homeowners can sometimes qualify for first-time buyer programs if they haven't owned a home for several years. More on that below.

Where to start looking for help

Many federal programs exist to help first-time homebuyers, especially low-income families. The Individual Development Account, or IDA, for example, helps low-income families with dollar-for-dollar matches when saving to buy their first home.

A mortgage broker or real estate agent should be able to steer you toward programs that fit your needs, but it’s a good idea to research them on your own so that a program that could help you isn’t missed.

State- and locally sponsored programs shouldn’t be overlooked. Check out the list of state- and local homebuying programs maintained by HUD (the U.S. Department of Housing and Urban Development). Clicking on some states will also lead to local assistance programs, such as the 30 cities in California that offer homebuyer programs.

Your state department of real estate may also have information on homebuyer assistance programs.

Also look for public housing agencies in your area, which may offer homeownership vouchers to help buy a home. Housing counseling agencies can also help, as can city managers or housing services or community development officials in the city you’re looking to buy a home in.

Private agencies provide housing assistance too. Habitat for Humanity is available in many areas to help families in need build and rehabilitate houses through volunteer labor.

Second chance after foreclosure

Many first-time homebuyer programs aren't strictly reserved for first-time buyers. The popular Federal Housing Administration program allows former homeowners to obtain a new FHA mortgage as soon as three years after foreclosure. That's just the start of financial help for homeowners who lost a home after foreclosure, short sale or bankruptcy. Every state offers some type of assistance.

Along with the three-year wait for FHA loans, other lenders and assistance programs have their own required waiting periods before applying again after a foreclosure or short sale. They include:

  • U.S. Department of Agriculture loan: 3 years
  • U.S. Department of Veterans Affairs: 2 years
  • Fannie Mae: 2 years
  • Freddie Mac: 2 years
  • Conventional loan: 7 years

The VA or FHA loan timelines can be shortened to as little as one year, and a conventional loan to three years, if borrowers show that their defaults were from a significant hardship that they’ve now recovered from. For example, you’ve recovered from a serious illness, or there was a death in the family that led to a financial hardship and foreclosure.

Help buying a home is available in every state. Here are a few of them:

Homebuyer help in Florida

Florida isn’t the state with the highest foreclosure rate in the nation, but it was sixth in 2017 with 24,215 foreclosures filed in 2017 — almost half as many as in 2016. That could require some help finding a home loan.

The Own a Home Opportunity Program in Palm Beach County, Fla., offers up to $10,000 in assistance, says Nathan Danus, director of housing and community development at DebtHelper, a nonprofit agency based in West Palm Beach that works with several first-time homebuyer assistance programs in the state.

The program offers a 0 percent “soft second” mortgage for up to $10,000 that must be paid back if the property is sold, Danus says. The income limit is $111,450 and a credit score of 660 is required for FHA loans. Additional closing cost credits are available: $1,500 if income is under $52,560, and $2,500 if income is under $32,850. The program is only for first-time buyers.

New York assistance

The state of New York has some of the highest housing prices in the country, so many buyers, including those doing it for the first time, may need some financial help.

The State of New York Mortgage Agency, or SONYMA, is a good place to start. This state agency was created in 1970 by the state government to provide affordable homeownership to low- and moderate-income New Yorkers.

Its mortgage programs don’t require a credit score, nontraditional credit is considered for some programs, and down payment assistance is offered. SONYMA has a Low Interest Rate Program to help buyers get favorable interest rates.

Down payment assistance can be added to any SONYMA mortgage program as a second mortgage with no monthly payments required and no interest charged. Up to $3,000 or 3 percent of the home’s purchase price up to $15,000 — whichever is higher — is available through a loan for closing costs.

My First Texas Home program

Texas also offers down payment and closing cost assistance — up to 5 percent of the mortgage amount as a no-interest, no-monthly-payment second lien — through the My First Texas Home program. It offers 30-year, low fixed-rate mortgages for first-time buyers through a group of participating lenders.

And just like the New York program, the second loan doesn’t have to be paid until the home is sold, refinanced or paid off. The loans can also be combined with the Texas Mortgage Credit Certificate program to lower your federal tax bill.

The mortgage credit certificate program allows first-time homebuyers in Texas to recoup a portion of the interest from their home loan. The federal tax credit is 40 percent of your annual mortgage interest, up to $2,000 per year. The mortgage credit certificate is valid for the lifetime of the loan.

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