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Top 5 First-Time Homebuyer Programs That Keep It Simple

Today’s young adults have a somber view of their home-ownership potential. However, an analysis of recent studies and surveys from RealtyTrac shows that most first-time homebuyers overestimate the cost and difficulty of purchasing their first property. Nearly three-fourths of Fannie Mae survey respondents between 18 and 34 years old were unaware that they could buy a home with a down payment of 5 percent or less. If you don’t know about the many available first-time homebuyer programs, keep reading, and you will.

Who Is a First-Time Homebuyer?

When most people think “first-time homebuyer,” they envision someone who has never owned residential real estate. However, that isn’t necessarily the only scenario.

Here’s how the U.S. Department of Housing and Urban Development (HUD) defines a first-time buyer:

  • An individual who hasn’t owned a principal residence during the three-year period ending on the purchase date of the property
  • A single parent who has only owned with a former spouse
  • An individual who is a displaced homemaker and has only owned with a spouse
  • An individual who has only owned a principal residence that was not permanently affixed to a permanent foundation in accordance with applicable regulations
  • An individual who has only owned a property not in compliance with state, local or model building codes, and which cannot be brought into compliance for less than the cost of constructing a permanent structure

This means first-time homebuyer programs are available to many people who probably don’t consider themselves new buyers. For example, many who owned and lost homes to foreclosure during the Great Recession are now eligible for these programs.

First-Time Homebuyer Programs Worth Looking Into

There are many programs tailored to first-time homebuyers that can help you purchase property and make your dreams a reality. Here are five homebuyer programs to check out:

1. Down Payment Assistance

The RealtyTrac study found 87 percent of homes in the U.S. meet guidelines for down payment assistance, and 91 percent of Down Payment Resource’s 2,290 down payment assistance programs have funds available for eligible buyers. Down payment assistance can be a grant, a loan or a “silent second” — a loan with no interest or payments required. When you sell your home, some of these programs require repayment at that time, while others will forgive the loan balance. Most down payment assistance programs are for first-timers who meet income eligibility guidelines, and many require you to complete some form of homebuyer education.

2. Mortgage Revenue Bond

Mortgage Revenue Bond programs (MRBs) are tax-exempt bonds issued by state and local governments to pay for interest rate subsidies for qualified first-time homebuyers. To be eligible, you must be a first-time buyer with an income at or below 115 percent of the median income in your area. You can look up your area’s threshold and multiply that figure by 1.15 to get your income limit.

If you’re eligible, your next step is applying for your MRB, or bond loan. In addition to subsidized interest rates, bond loans often come with more flexible credit and income guidelines and/or down payment and closing cost assistance. It can be combined with down payment assistance, up to 5 percent of the purchase price for down payments and/or closing costs. You can find these programs by contacting your state housing finance authority for a list of participating mortgage lenders.

3. Half-Priced Homes From HUD

That’s not a misprint: Teachers, law enforcement personnel, firefighters and paramedics can purchase HUD foreclosure properties at a 50 percent discount. They don’t have to be first-time homebuyers either, but they do have to commit to living in the home for three years or longer. If buyers finance the properties with FHA mortgages, their down payment is just $100. HUD provides a zero-interest-rate “silent second” mortgage for half the home’s sales price, requiring no payments. After three years, the second is forgiven.

4. Community Mortgages From Fannie Mae and Freddie Mac

First-time homebuyer programs are not just government-backed loans. Fannie Mae and Freddie Mac have the largest share of the conventional (non-government) mortgage market, and their community mortgages are just for first-timers. Fannie Mae’s is called MyCommunityMortgage and Freddie Mac’s is called Home Possible. They are very similar, with a minimum 3 percent down payment (and that can be gifted or borrowed with a Community Seconds mortgage), and a homebuyer education requirement. In fact, with a Community Seconds or Affordable Seconds mortgage, you can borrow your closing costs as well — both loans can total up to 105 percent of the property value. To qualify for these programs, your income cannot exceed 100–170 percent of the Area Median Income, depending on the property location. You’ll have to pay mortgage insurance premiums, but they are significantly lower than those of traditional conventional mortgages.

5. Traditional Zero-Down Mortgage Programs

Many first-time buyer breaks can be combined with traditional zero-down mortgage programs for veterans (backed by the U.S. Department of Veterans Affairs) and U.S. Department of Agriculture (USDA) home loan programs. Traditional zero-down programs do not require you to be a first-time buyer. For example, you may be able to combine a zero-down USDA home loan with a Mortgage Revenue Bond program and a Community Seconds mortgage to cover your closing costs.

There are many, many programs out there with money for first-time homebuyers who meet income eligibility guidelines. Be sure to do your research before purchasing your first home.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of Owners.com, Altisource or any other Altisource® business or entity. The foregoing content is not intended to constitute, and in fact does not constitute, financial, investment, tax or legal advice by the author, Owners.com, Altisource or any other business or entity.


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