First Time Home buyer Programs, Grants and Loans

Taking the steps to buy your first home can be exciting and overwhelming all at the same time. There is a lot to consider when looking at purchasing a home, like your lifestyle and income. There are also a lot benefits to owning a home, like establishing credit and receiving tax benefits.

First Time Home Buyer Programs

There are programs for first time buyers to make it easier to purchase your first home. There are local programs as well as federal programs. The most popular federal program for first time buyers is FHA loans, which are described in more detail in the loans section of this article. Another federal program that helps buyers purchase homes is called the “Good Neighbor Next Door” and helps law enforcement officers, pre-kindergarten through 12th grade teachers, and firefighters/emergency medical technicians to become homeowners.

Individual states also sponsors local home buying programs that benefit first time buyers. To see the programs your state offers, click here.

Down payment Assistance

Sometimes the hardest obstacle to owning a home is to find the resources for a down payment. Many lenders require a down payment of 20% or more, and when you’re young and just starting out that can be difficult to achieve. That’s why many first time homebuyers look at FHA loans — they typically require a down payment of only 3%.

Another option for down payment assistance is the HomePath program by Fannie Mae. The HomePath program allows buyers to purchase a home with 5% down and without having to pay for mortgage insurance. With HomePath, all of the down payment can be a gift, a grant or a loan. However, the loan can only be used to purchase Fannie Mae-owned foreclosed properties, which may not be right for every first time buyer.

Tax Credits for Homebuyers

From 2008-2010 there was a first time home buyer tax credit. While that legislation has expired, there are still other ways that buying a home can benefit you when tax season rolls around.

When you own your home, the cost of your mortgage loan interest can be deducted from your federal income taxes, and usually from state taxes. This will save you a lot each year, because the interest you pay will make up most of your monthly payment for most of the years of your mortgage. You can also deduct the property taxes you pay as a homeowner.

Types of Loans for Homebuyers

Like most first time homebuyers, you may want to keep your first time mortgage payments low, and there are a wide variety of loan programs for first time homebuyers. When you’re looking for loans, you will want to know what you can afford and research the types of loans and assistance programs available to you. Working with a lender is the best way to find the best mortgage rates in your area based on your loan type, credit history and down payment amount. Here are the most popular types of home loans:

FHA Loans

These low interest loans are insured by the Federal Housing Administration which is open to all qualified homebuyers. FHA loans do have amount limits, but they are usually adequate enough to cover most moderately priced homes.

VA Loans

If you have served in the military in the past or currently serve, you are elegible for a VA loan. These loans are long term, with low or no down payment, and are guaranteed by the Department of Veterans Affairs.

Fixed Rate Mortgages

These mortgages are called “fixed rate” because the interest rate stays the same throughout the term of the mortgage for the original borrower. One of the most popular fixed rate mortgages is the 30 Year because it offers lower monthly payments over the life of the loan.

Adjustable Rate Mortgages

Adjustable rate mortgages are loans where the interest rate is adjusted from time to time based on a pre-selected index. The main advantage of an Adjustable Rate Mortgage (ARM) is that buyers will be able to afford a more expensive home because the initial interest rate and payments are lower in the first couple of years.

When it comes to being a first time homebuyer, make sure that you do your research and surround yourself with a qualified team – including a buyer’s agent and local mortgage lender. As you go through the home buying process, have fun and enjoy it. At the end of it all you will own something that you can call your own for years to come!