To our User Community and Facebook fans, we hear you! You may be struggling with your finances but you’re really trying to make a better life for yourself and your family. Buying a home feels like a distant dream. You hold on to it because it’s something you want and need. And maybe you’ve heard there could be help out there for you.
The great news is that help — generous help — is available for many. It’s important to focus on facts and know whom you can trust. Here we provide reliable information on what to do, what to look for and what to avoid as you pursue your dream. We'll show you what it takes to get help to buy your first home. It may be something you have or can get!
First be sure you are serious and willing to put out effort to make it happen. You must be prepared with knowledge as well as motivation to make it happen. There are lots of people and organizations out there who sincerely want to help you. Unfortunately there are also some who want to take advantage of your situation. Here are the facts:
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New Strategies to Beat the Competition and Buy That New Home
Update April 2019 Be sure to keep in mind that most states offer home purchasing programs to assist first time home buyers who live in their state. So that is a good place to start your search for assistance. And remember that typically the definition of “first time home buyer” does not mean just the first home you have ever purchased. You also qualify if you have not owned a home for at least the three previous years. As an added bonus your state’s home buying site will also provide information about lenders available to you. They may also provide some guidance about what homebuyer classes might be helpful to you and where you can find them
Update August 2018: You may find increasing competition for your first home these days. Confidence in the economy is building, more people are employed and/or are being paid higher wages, and new programs are available to help with down payments. (See the latest updates to Down Payment Assistance). Now there’s another new strategy becoming more common: Buyers tapping their parents’ home equity to get into their own homes. Especially in areas where all-cash offers and bidding wars are becoming the norm, this option can make your odds much stronger. Of course, you have to have parents with enough equity in their homes along with the willingness to help you out. It can be a pretty sweet deal because typically after the new home purchase closes, the buyer (the child) refinances their new house and is able to pay his or her parents back quite quickly. Of course sellers love it, because they don’t have to depend on a contingency offer. And often the real estate broker is able to help coach the young buyers into how to talk to their parents and explain the whole series of transactions to them.
Update February 2018 Need help getting your financial situation in order and improving your credit sore so you have a prayer of getting a great mortgage and even help with your down payment on a new home? Look for locations of HOPE Inside near you. They operate in places like bank branches, colleges, police departments, grocery stores and more, reaching out to people in “low wealth” areas. They partner with banks to provide a home ownership program including a workshop for homebuyers and “Pre-Purchase Counseling”. You will understand the whole home buying process much better and maybe even get some help from a nonprofit to afford your down payment. Checkout the website operationhope to find locations.
Update August 2017 If you really want to buy a home and just don’t know how to make the downpayment, don’t give up. And don’t wait for something to come to you — go looking for the one that can make things happen for you. The FHA has a number of excellent programs and any lender should be able to help you understand them. Some go pretty far — like an offer from QuicknLoans to give you a 1% mortgage if you qualify. They make it pretty easy to find out fast if you qualify — after all, they want to give you a mortgage if you do! Just go to their website and click the link or search “first time home buyer.”
Update April 2017 This spring is turning out to be a tough market for home buyers. In many areas inventory is very low and prices are increasing. But if you're in a profession like firefighter, police, emergency medical technician or K-12 teacher, you could benefit from the Good Neighbor Next Door Program. It's run by HUD and if you're willing to live in areas they designate as “revitalization areas” you could get a reduction of 50% in the price of the home as long as you will live in the house for at least 3 years. Check out the HUDHomes website to search for properties available in your area.
Update September 2016 The housing market is in a tough spot at the moment — and that could be good for you! A recovery began in 2012, but now more and more potential buyers are having to resort to renting. Prices are pretty high — up in more than 80% of the major real estate markets in the U.S. according to the Wall Street Journal. So they’re now just a little under the peak they reached in July of 2006 — more because of a lack of supply than a lot of new buyers. Many potential buyers have been hit with lower credit scores after the 2008 fallout, student debt and more. But it’s not time to give up — there are still great programs to help you get into a home:
Assistance for those wishing to buy a home comes from three major sources:
The U.S. Department of Housing and Urban Development (HUD) awards billions of dollars each year in support of making home ownership accessible to more people. The American Recovery and Reinvestment Act of 2009 included over $13 billion for housing-related programs. More than $10 billion of that was awarded to state and local agencies. That’s important to understand because HUD does not give any grants or “free money” to individuals for any purpose. So if you are looking for help to get into your own home don’t wait for—or expect—the President or the federal government to give it to you. They make funds available to the states and to groups and organizations. So you need to know how to find them.
The USDA (Department of Agriculture) is full of surprises when it comes to loans and assistance for home buyers. Some people assume you have to be a farmer or live on a farm in order to qualify but that’s not the case. They have a Rural Development Program and have invested billions in order to help people buy and make improvements to their home. And you might be surprised at the areas designated as “rural” — they’re not just way out in the boondocks. You could get help getting a lower mortgage rate, qualify (if you’re considered low income) for a direct loan with a mortgage rate potentially as low as 1%, or look into loans for home improvements.
The HOME Investment Partnership Program is one of the block grants that the federal government provides to each state. Many states use these funds, sometimes working with non-profits in the state, to provide assistance to low income folks for rental expenses and to help those trying to come up with the down payment needed to buy their first house. The amount available and the terms and such are specific to each state, but they can be pretty attractive. Though some of the assistance comes through loans, many are forgivable after a specific amount of time spent living in the home, so they are really more like grants. You can do an internet search to find more about this program in your state, or your bank or other mortgage lender should have information about it.
State Housing Finance Agencies These organizations are key to your search and they are not difficult to find. Every state has a housing finance agency (HFA). You can find it by doing an internet search. In fact, you can simply enter the name of your state and the words “housing finance agency” in the search box right at the top of this page. This is an excellent place to start as your local office can provide free counseling to explain what types of programs are available and what you may qualify for.
City Specific Programs In addition to checking out what your state has to offer, also check with the city where you live. Especially if you live in a big city, you may be surprised what kinds of programs they have right at the city lovel. For instance, in San Francisco the Mayors Offie of Housing and Community Development (MOHCD) offers qualifying first time home buyers help with mortgage loan rates down payments, and opportunities to buy homes at below market rates. These are provided either directly by the city oor through partner agencies. You just have to take a homebuyer education course and work with a city-approved homebuyer counseling agency to develop a plan and then you can apply for the MOHCD programs. So be sure to do a search for your specific city when looking for first time homebuyer assistance.
Private Non-Profit Organizations There are wonderful charitable organizations that exist to help people afford housing and specifically to help them buy their first home. These groups most often work with or through your state and local government housing agencies and their approved lenders. So, again, it is important to start with your state’s housing agency.
Update May 2016: There are Direct Home Loans available for Native Americans who are Veterans, or who are married to a Native American non-Veteran.. These loans can be used to buy, build or make improvements to a home that is on Federal Trust land. The Veteran receiving this loan must live in the home as a primary residence. For more information you can contact your local housing authority and the VA and/or check out the Native American Direct Loan (NADL) website.
Update February 2016 Be aware that investors are still aggressively going after home purchases, often with all cash. Foreclosures are not so prevalent any more, but many are seeking to scoop up homes because of a growing rental market. Some claim illennial are not interested in buying homes but prefer to rent. In October 2015 25% ofhomesales are to investors. This is down from a peak of 32% after the housing crisis, but still pretty high. You can still buy a new home though – you just have to be very prepared and persistent. Don't give up: investigate all the programs below, get your ducks in a row, and keep at it! (If it doesn't work out, maybe there will eventually be a glut in the rental market!)…
While there are differences in each state the following types of programs should be available and are worth looking into:
- FHA Loans: These are loans insured by the federal government and typically have down payments that are lower than usual, lower closing costs to complete your home purchase, and easier credit qualification requirements. You may be able to include in your loan the costs of doing home repairs for a fixer-upper and improvements which make your home more energy-efficient. Be sure you are talking to an official FHA lender, which you can again find with a Search.
- Down Payment Assistance Programs: If you still need help with your down payment. You may get a separate loan (besides your mortgage) that you don’t have to repay until you sell the property. Special programs offer more assistance to teachers and other staff of “high priority” schools (as designated by the state). These are great because, combined with the lower FHA requirements, they may allow you to buy a home with little or no money down.
- Mortgage Credit Certificate Tax Credit Program: The MCC is a certificate you must apply for in order to get an extra tax credit on your income tax return. It reduces your monthly homeownership expenses and might help you qualify for lower up-front costs to buy your home. You apply for the MCC through your lender during the home-buying process, so be wary of any other person or group who claims they can get you this certificate if you pay them a special fee. Start with your local government housing agency and confirm your lender is officially qualified to help you take advantage of all available assistance programs.
- Home Buying Assistance from Nonprofit Organizatons: Sometimes non-profit groups will help pay for your down payment. The Corporation for Enterprise Development is a national group that helps low- to moderate- income families establish assets and buy their first home through a matched savings account program. They also offer financial education programs and job training or assistance with a small business. These programs are offered through partnerships with banks and credit unions so be sure you are dealing with an approved lender. You can check the HUD website to find a list of these lenders. Learn more in our article about grants to purchase a home.