Are you looking for the best grants for your new home? Read all you need to know about the first-time home buyers grants and down-payment assistance in this guide. Owning a home lies at the heart of the great American dream. Yet, with today’s economy, it might seem out of reach.
One of the biggest challenges to buying a home is securing a down payment. Most borrowers do everything they can to avoid the traditional 20% down payment required for first time home buyers. First time home buyer also like to avoid private mortgage insurance, high interest rates and closing costs.
Fortunately, there are government, private, and nonprofit home buying grants that offer first-time homebuyer grants that don’t need to be repaid. These home buyer grants usually help close the gap between your savings and the required down payment, and some may even assist with closing costs, provide interest rate discounts, or offer loan forgiveness.
What Are the Best Grants for First-Time Home Buyers and How Do I Get Down Payment Assistance?
The rising cost of down payments, closing fees, and mortgage payments can deter prospective buyers from leaping into homeownership. But fret not, because there are first time home buying grants and government down-payment assistance programs available to turn your dream into a reality.
These initiatives offer financial support to families by alleviating the burden of upfront expenses, empowering aspiring homeowners to secure their place in the housing market.
In this article, I will shed light on some of these incredible grants that you can consider for down payment assistance.
What Are First-Time Home Buyer Grants?
The term, “first-time home buyer” refers to people who have either never owned a home, or have not owned a home in the last three years.
First-time home buyer grants are financial assistance programs offered by various levels of government, nonprofit organizations, and even some employers to help people purchase their first home.
Unlike loans, grants do not need to be repaid, which makes them a valuable resource for those with limited financial resources.
They typically provide funds to cover down payments, closing costs, and other expenses associated with buying a home.
How to Qualify for First-Time Home Buyer Grants?
It is essential to know that not all first-time home buyers are eligible for down payment assistance. Qualifying for the grants involves meeting specific criteria set by each program.
Some common qualifications are as follows:
- Income Limits: Typically, your income must be at or below a certain percentage of the median income for the country or community where you are purchasing. This threshold is often around 80%, but it can vary depending on the program.
- Down Payment Contributions: Some programs require you to contribute a percentage of the purchase price as your down payment. This amount can range from 1% to 3% of the purchase price. They may also require proof of a minimum amount in savings.
- Home Prices: Grants may specify that the home purchase price cannot exceed a certain amount, ensuring affordability for low-to-moderate income families.
- Credit Score: Requirements vary by program, but you may need a minimum credit score of 620 or 640 to qualify. Additionally, some programs also have specific debt-to-income ratio requirements. If you have a credit score below 620, check out first time home buyers for bad-credit.
- Financial Counseling: Many grants mandate recipients to complete a homebuyer education course, providing essential knowledge and skills for successful homeownership.
- Residence: Grants typically require you to live in the home as your primary residence. Some programs may also stipulate a minimum occupancy period before you can sell or rent out the property.
This eligibility criteria ensures that assistance is provided to those who need it the most, while also promoting responsible homeownership.
Are You Looking for Grant Money for First Time Home Buyers?
With interest rates finally dropping, first-time homebuyers have access to down-payment grants from a range of sources, including federal, state, local, and nonprofit organizations:
Federal Home-Buyer Grants: Programs such as HomePath Ready Buyer, Good Neighbor Next Door, and the FHFA first-time homebuyer mortgage rate discount.
State Home-Buyer Grants: State housing finance agencies, which can be located through HUD.
Local Home Buying Grants: Cities and counties may provide grants.
Nonprofit Home-Buyer Grants: Organizations like the National Homebuyers Fund, offering grants for down payments and closing costs, which can amount to up to 5% of the home’s purchase price.
Types of First-Time Home Buyer Grants
When it comes to needing assistance for a first-time home purchase, there’s no one-size-fits-all. Therefore, first-time home buyer grants also come in various types, offering unique benefits, and catering to different prospects.
Here are some of the major types of first-time home buyer grants:
- Down Payment Assistance: It provides funds to cover all or part of the down payment required to purchase a home.
- Interest Rate Discount: Some programs offer a reduced interest rate on the home mortgage loan, making homeownership more affordable over the long term. This can help you save a significant amount on monthly mortgage payments.
- Closing Cost Assistance: Closing costs can add up to thousands of dollars, but with this type of grant, eligible buyers receive financial assistance to cover these expenses. It reduces the upfront costs associated with buying a home.
- Forgivable Loans: Forgivable loans provide funds that do not need to be repaid as long as certain conditions are met. These conditions may include living in the home for a specified period or maintaining it as your primary residence.
- Tax Credits: Instead of providing direct financial assistance, some grants offer tax credits to eligible first-time home buyers. These credits can reduce the amount of federal income tax owed, putting more money back into the buyer’s pocket.
Please note that each program offering the first-time home buyer grant has its benefits, and may not offer all types of assistance. It is important to therefore research and understand the options available in your area.
Frequently Asked Questions
What is the income limit for first-time home buyer grants?
Income limits for first-time homebuyer grants vary depending on the specific program and location. Generally, these grants target low- to moderate-income individuals or households. Eligibility often considers factors such as area median income (AMI) and may restrict assistance to those earning up to 80% or 120% of the AMI.
How do I get first-time home buyer down payment assistance?
You can explore new first time home buying programs offered by government agencies, nonprofits, and lenders in your area for down payment assistance.
These DPA programs often have specific requirements regarding income, credit score, and homeownership education that you need to meet to apply for and receive the funds.
Best First-Time Home Buyer Grants to Consider
Now that you know what first-time home buyer grants are and how they work, let’s have a look at some of the best programs you can consider for the grant:
National Homebuyers Fund
National Homebuyer Funds is a prominent option for first-time home buyers seeking financial assistance. They provide payment assistance loans and closing cost coverage of up to 5% of the home purchase price, significantly reducing the financial burden of buying a home.
What’s more, NHF’s eligibility criteria are relatively flexible. You don’t need to be a first-time buyer to qualify, and the income limits cater to both low and moderate-income individuals.
With a minimum FICO score of 640 and a maximum debt-to-income ratio of 45%, NHF grants and loans can be used in conjunction with various mortgage loan types, including conventional, FHA, VA, and USDA loans.
Bank of America Grant Programs
Bank of America offers two grant programs aimed at easing the financial burden of buying a home: America’s Home Grant and Down Payment Grant.
America’s Home Grant provides up to $7,500 in lender credits for closing costs, while the Down Payment Grant offers up to $10,000 in down payment assistance. However, to qualify, you must obtain your mortgage from Bank of America. It’s worth noting that the Down Payment Grant may be considered taxable income.
These grants present valuable opportunities for qualified homebuyers to access financial assistance when purchasing a home, making homeownership more attainable and affordable.
HomeReady Mortgage
The HomeReady mortgage, sponsored by Fannie Mae, is a favorable option for low-to-moderate-income borrowers seeking homeownership. With a down payment requirement as low as 3%, compared to the standard 20%, it provides greater accessibility to homebuyers.
Eligible borrowers, including first-time and repeat buyers, need a credit score of at least 620, although higher scores can lead to better pricing options.
HomeReady also offers affordable mortgage insurance and allows flexibility in obtaining funds for down payments, including gifts, grants, and Community Seconds mortgages.
Additionally, the program extends to those who wish to refinance existing mortgages. With its inclusive eligibility criteria and attractive benefits, HomeReady opens doors to homeownership for a broader range of individuals and families.
FHA Mortgage
An FHA loan, backed by the Federal Housing Administration (FHA), offers an accessible path to homeownership for individuals with lower credit scores or limited down payment savings.
With a low minimum credit score requirement and down payment as low as 3.5%, it’s particularly attractive for first-time homebuyers.
FHA first time home-buyer loans come with fixed or adjustable interest rates and offer two term options: 15 or 30 years. Borrowers must pay mortgage insurance premiums (MIP) to protect the lender against default.
They offer various types, including the basic 203(b) loan, rehabilitation 203(k) loan, disaster victims 203(h) loan, home equity conversion mortgage (HECM), energy-efficient mortgage (EEM), and graduated payment mortgage 245(a) loan.
Each type caters to different needs, from home purchases and repairs to energy efficiency upgrades and reverse mortgages. See HUD for the latest on the Federal housing programs.
Home Possible
The Home Possible program by Freddie Mac offers a viable path to homeownership for low- and moderate-income households, with a focus on affordability and accessibility. This program enables eligible homebuyers to access lower mortgage rates and subsidizes costs, making homeownership more achievable.
With a minimum down payment of just 3%, flexible credit score requirements, and options for payment assistance loans, Home Possible aims to empower individuals to fulfill their American Dream of owning a home.
Eligibility criteria are straightforward, including income limitations, residency requirements, and credit score thresholds. By providing reduced mortgage insurance premiums and favorable mortgage rates, Home Possible strives to make homeownership more attainable for a broader spectrum of potential buyers.
Trusted California First Time Home Buyer Programs
California Dream For All Shared Appreciation Loan
CALHFA contributes to fostering diverse communities through financing programs aimed at providing more Californians with the opportunity to secure a home of their own. Lets explore why the CALHFA loan is so popular with first time home buyers in California.
The CA Dream For All Shared Appreciation Loan serves as a down payment assistance initiative tailored for first-time homebuyers, designed to complement the Dream For All Conventional primary mortgage for covering down payment and/or closing expenses.
- Provides assistance of up to 20% for down payment or closing expenses, capped at $150,000.
- Prospective homebuyers are required to enroll for a voucher.
- Allocation of vouchers will be determined through a random selection process, rather than on a first-come, first-served basis.
CalHFA USDA loan
The CalHFA USDA loan is a 30-year fixed-rate home loan supported by the United States Department of Agriculture, featuring first time home buyer grants known as the “MyHome Assistance Program.” In addition to adhering to CalHFA criteria, applicants for the CalHFA USDA loan program must also satisfy USDA income limits and reside in eligible rural areas to be eligible.
CalHFA FHA loan
The CalHFA FHA mortgage plan, backed by the Federal Housing Administration, offers a 30-year fixed-rate mortgage. This first time buyer loan option enables the acquisition of a single-family home or an approved condominium.
CalHFA VA loan
The CalHFA VA loan offers eligible veterans and active-duty service members a VA-insured mortgage with a 30-year loan term and fixed interest rate. This first time home buyer program enables the financing of a single-family home or condominium purchase.
Popular First Time Home Buyer Grants in California
San Diego Housing Commission
The San Diego Housing Commission (SDHC) provides deferred-payment loans and homeownership grants aimed at aiding low- and moderate-income households in purchasing their initial residences.
Through the SDHC First-Time Homebuyer Program*, individuals can receive support in acquiring a single-family home, townhouse, or condominium within the City of San Diego. Qualified purchasers, earning 80 percent or less of San Diego’s Area Median Income, may be eligible for a deferred-payment, second trust deed loan amounting to as much as 25 percent of the property’s purchase price, featuring an interest rate of 3 percent.
CalHFA MyHome Assistance
The CalHFA MyHome Assistance program provides eligible homebuyers the opportunity to borrow up to 3.5% of their down payment and closing costs.
To be eligible for MyHome down payment assistance, buyers must:
- Qualify as a first-time homebuyer
- Acquire a single-family residence
- Reside in the property as their primary dwelling
- Fulfill homebuyer education counseling requirements
- Adhere to income restrictions
Texas First Time Home Buyer Grants
The Texas State Affordable Housing Corporation (TSAHC) is a nonprofit entity established by the Texas Legislature to facilitate Texans in realizing their homeownership aspirations, particularly focusing on assisting Texas first-time homebuyers.
Homes for Texas Heroes Program: Inquire about the HTHP designed specifically for individuals in hero professions. Hero professions encompass:
- Professional educators, encompassing various full-time roles in public school districts such as teachers, teacher aides, school librarians, school counselors, and school nurses.
- Police officers and public security officers
- Firefighters and EMS personnel
- Veterans or active military personnel
- Correction officers and juvenile corrections officers
- Nursing faculty and allied health faculty
Ohio First Time Home Buyer Programs
If you’re in the market for a home and require assistance with down payment and closing costs, turn to the Ohio Housing Finance Agency (OHFA). OHFA provides a range of 30-year, fixed-rate loans, including conventional, FHA, VA, and USDA-RD government loans, featuring ample income and purchase price thresholds, tailored specifically for low- and moderate-income homebuyers.
Through the Your Choice! Ohio Down Payment Assistance program, homebuyers can opt for either 2.5% or 5% of the home’s purchase price. This down-payment assistance can be applied toward down payments, closing costs, or other pre-closing expenses. The assistance is forgiven after seven years. However, if you sell your home within seven years, you are required to repay all of the assistance provided.
Alabama Down Payment Assistance
The Alabama Housing Finance Authority (AHFA) offers an array of programs and initiatives aimed at enhancing accessibility and affordability of homeownership for Alabama residents. Among these is financial aid in the form of a Down Payment Assistance (DPA) and closing cost grant, easing the initial financial burdens associated with home purchasing.
AHFA Step Up DPA
AHFA extends a First Step loan of up to 4% of the purchase price, with a maximum of $10,000, for a down payment on a new or existing home in Alabama. This first time home buying assistance is provided through a 10-year second mortgage, subject to the following conditions:
- Household income must not exceed $159,200.
- A fico score of 640 or higher is required (680 or higher if income exceeds 80% of the area’s median income).
- Debt-to-income ratio should be 45% or lower.
- The primary mortgage must be a HFA Advantage conventional loan, FHA loan, or VA loan from a participating lender.
- Completion of a homeownership education course is mandatory.
Arizona Down Payment Assistance Programs
Arizona homebuyers have the choice between two down payment assistance programs, depending on the property location. BD Nationwide will help you find grants for first time home buyers in AZ.
Home Plus Arizona
Offered by the Arizona Industrial Development Authority (Arizona IDA), the Home Plus Arizona program provides up to 4% of the initial mortgage balance. The amount is contingent upon the chosen mortgage type and can be utilized for both down payment and closing costs.
- A minimum fico score of 640 is required for program eligibility.
- Annual income must not exceed $126,351 to qualify.
- Completion of a homebuyer education course prior to loan closing is mandatory.
- Home Plus involves a 3-year deferred second mortgage with no interest or monthly payments, provided the property is not sold or refinanced within the first 3-years of homeownership.
Down Payment Assistance in Colorado
For eligible residents of Colorado, both the Colorado Housing and Finance Authority (CHFA) and the Colorado Housing Assistance Corporation (CHAC) provide grants and second mortgages to assist with down payments.
Florida Down Payment Assistance Programs
The Florida Housing Finance Corporation (FHFC) serves as a vital resource and primary destination for buyers in Florida. With a range of programs including down payment assistance, low-interest loans, and homebuyer education, FHFC plays a crucial role in supporting first-time homebuyers in Florida.
Florida Assist
Florida Assist entails a deferred second mortgage with a 0% interest rate, providing assistance of up to $10,000. This amount can be utilized for down payment, closing costs, or both. The loan requires no monthly payments and is only repaid upon selling, refinancing, or fully paying off the initial mortgage.
Florida Hometown Heroes Housing Program: The Florida Hometown Heroes Housing Program is aimed at aiding individuals who contribute valuable services to their communities, such as teachers, healthcare workers, law enforcement officers, firefighters, and veterans. Eligible borrowers can receive up to 5% of the first mortgage loan amount, or a maximum of $35,000, to assist with down payment and closing costs.
Georgia First Time Home Buyer Assistance
There are many worthy free grants for first-time home buyers in Georgia.
Georgia Dream Homeownership Program
- The Georgia Dream Homeownership Program helps eligible residents purchase a home by offering affordable financing options, assistance with down payments and closing costs, and homebuyer education.
Hawaii Down Payment Assistance Programs
While Hawaii lacks an official statewide down payment assistance program, support is still accessible for first-time homebuyers in the state. The Hawaii Home Ownership Center, a non-profit mortgage brokerage, offers both down payment assistance and a 15-year deferred closing cost loan.
Kansas Down Payment Assistance Programs
Kansas is home to three statewide down payment assistance programs, ensuring a diverse range of options to cater to various needs of first-time homebuyers.
Kansas Housing First-Time Homebuyer Program: Administered by the Kansas Housing Resources Corporation (KHRC), this program offers specialized mortgage loans along with several down payment assistance options for buyers in the Sunflower State. Participants can secure a silent second mortgage, borrowing either 15% or 20% of the home’s cost, without the obligation of monthly payments.
Maryland Down Payment Assistance Opportunities
The Maryland Department of Housing and Community Development (MDHCD) extends support to homebuyers through its Maryland Mortgage Program. Borrowers utilizing the 1st Time Advantage home loan may access one of several Down Payment Assistance loan options:
Flex 6000: Provides a $6,000 interest-free loan for down payment and closing costs, with no monthly payments required. Repayment of the initial $5,000 is mandatory upon selling, refinancing, transferring, or completing the mortgage payment.
Flex 3% Loan: Borrowers can secure 3% of their first mortgage under similar terms as the Flex 6000 loan.
Partner Match: Exclusive to specific MDHCD mortgages, this option provides a no-interest, deferred loan for down payment and closing costs.
1st Time Advantage 6000: Offers a $6,000 interest-free loan with no recurring payments. However, repayment is required upon selling or refinancing before fully paying off the mortgage loan.
1st Time Advantage DPA: Allows borrowers to borrow up to 3%, 4%, or 5% of their first mortgage loan for down payment and closing costs.
HomeStart: Qualified borrowers with income equal to or greater than 50% of the area median income (AMI) may receive DPA of up to 6% of the loan amount.
Oregon Down Payment Assistance Programs
Did you know that the Oregon Housing and Community Services (OHCS) offers down payment assistance programs for first-time buyers, primarily targeting low- and very low-income families and individuals, with a particular emphasis on underserved populations? While specific financial assistance details are not available on the OHCS site, interested parties are encouraged to contact the housing agency directly for more information.
Pennsylvania Down Payment Assistance
The Pennsylvania Housing Finance Agency (PHFA) provides an array of down payment assistance programs for first time home buyers:
PHFA Grant: Offers a $500 grant that can be used alongside an HFA Preferred loan.
Keystone Advantage Assistance Loan Program: Provides a second mortgage up to $6,000 or 4% of the purchase price, repayable over 10 years at zero percent interest. Keystone Forgivable In Ten Years Loan Program (K-FIT): Grants up to 5% of the purchase price or appraised value, forgiven over ten years at a rate of 10% per year. Access Down Payment and Closing Cost Assistance Program: Eligible individuals may receive a no-interest loan of up to $15,000 for down payment and closing costs, with additional funding options for accessibility modifications.
HOMEstead DPA: Offers assistance of up to $10,000 in the form of a zero-interest second mortgage loan. Funds are forgiven at a rate of 20% per year, resulting in ownership being transferred if not sold or refinanced within five years.
Employer Assisted Housing (EAH) Initiative: Qualified participants may receive up to $8,000 in down payment and closing cost assistance through their employer’s EAH program.
