First Time Homebuyer? – These Programs Are for You

Jimmy Lee |
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First Time Homebuyer? – These Programs Are for You
June 1, 2021

Do you fantasize about one day owning a home but don’t think you’ll ever be able to afford it? Do you wonder how you’ll ever come up with the down payment needed to purchase a home or how you’ll ever be able to get a loan with your low credit score?

If you do, then we have good news for you!! The American dream of owning a home is not just for the wealthy, there are a number of first-time homebuyer programs available to help make your dreams of homeownership a reality! These programs help people get low-interest mortgages when they can’t obtain them anywhere else, and since most of these programs are backed by government organizations, qualification requirements are a lot less strict than the traditional (conventional) loans.


FHA Loans (Federal Housing Administration)

  • Secure a loan with a down payment as low as 3.5% of the purchase price of the home with a credit score as low as 580 (down payments for conventional mortgages are usually 20%)
  • Gone through a bankruptcy in the past?! No problem obtaining an FHA loan as long as 2 years have passed
  • Usually provide considerably lower interest rates than traditional loans
  • Requires borrowers to pay mortgage insurance premiums usually upfront and on a monthly basis to protect the lender from defaults

Conventional 97% LTV Program – (Wait I thought you needed 10-20% down for conventional loans?!)

  • Requires a down payment of just 3% (.5% lower than FHA loans!)
  • More stringent requirements (minimum credit score of 620 and one of the borrowers must not have owned a house in the past 36 months)
  • Requires borrowers to pay mortgage insurance premiums to protect the lender in case of defaults

​USDA Loans (United States Department of Agriculture)

  • Issues low-interest-rate mortgages to low-moderate income earners who wish to live in “rural areas” (the word rural is definitely broadly defined!)
  • Must make less than 115% of the median income for the area in which you live to qualify
  • Secure a loan with a low to NO down payment with a credit score of 680 or above
  • Requires borrowers to pay mortgage insurance premiums to protect the lender in case of defaults

VA Loans (Department of Veterans Affairs) – For our current and formal military members!

  • Requires no down payment and usually provides considerably lower interest rates than traditional loans
  • Does not require borrowers to pay mortgage insurance and carries no prepayment penalty
  • Upfront funding fee is required (1.25-2.25%) unless you meet requirements for disabled veteran status

NADL – Native American Direct Loans

  • A VA backed loan for homes on Federal Trust Land and VA sets the interest rates on the loans
  • Must be Native American and enrolled in an American Indian Tribe or Alaskan Native Village
  • Have to apply for VA home loan Certificate of Eligibility to qualify

HUD Programs – U.S. Department of Housing and Urban Development

  • Good Neighbor Next Door – provides 50% off homes for teachers, firefighters, and police officers
  • HUD Dollar Home Program – sells previously foreclosed homes for $1 to local governments, faith-based organizations, and nonprofits to help low-income families find affordable housing.
  • State and Local Programs
  • Most states also provide their own first-time homeowner programs. Make sure you check what programs are available through your state before purchasing a home!!

As always, please reach out to your trusted advisor with any questions.

Disclosures:

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through WCG Wealth Advisors, a registered investment advisor. WCG Wealth Advisors and The Wealth Consulting Group are separate entities from LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investing in stock includes numerous specific risks including the fluctuation of dividends, loss of principal, and potential illiquidity of the investment in a falling market. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. Investing involves risk including loss of principle.