10 Grants & Programs for First-time Homebuyers in the USA

Do you dream of owning a home? Statistics show that many millennials are now reaching the age where they are thinking about home ownership and starting a family. However, many of them don’t have the finances available to apply for a mortgage.

With the state of the economy, it’s not only millennials that are struggling to buy a piece of real estate they can call their own. Home ownership is down across all age groups, with most people struggling financially. Stagnant wage growth and the rising cost of living is crippling many Americans financial positions, forcing them into renting.

However, if you’re thinking about buying a house, and don’t have all the funds you need to acquire a piece of property, there may be an alternative way to purchase your home. The government realizes that many Americans can’t afford the cost of home ownership. As a solution, they came up with numerous buying programs and grants to help Americans purchase their first piece of real estate.

Many people have no idea that these government-sponsored programs exist. In this article, we aim to provide you with everything you need to know about how to get government-sponsored aid when purchasing your home. Here are ten grants and programs for first-time home buyers.

1. Fannie Mae and Freddie Mac

These government-sponsored organizations partner with lenders and financial institutions across the United States to deliver mortgages to those Americans that would otherwise be unable to afford the costs of homeownership.

Fannie Mae and Freddie Mac provide people who cannot afford a home, with a mortgage that features low-interest rates. As a result of this partnership, many Americans may be in a strong enough financial position to buy a home.

Fannie Mae and Freddie Mac allow homeowners to take on a mortgage, with a minimal down payment and low-interest rates. Research by the U.S. government shows that the sticking point in homeownership is due to these two factors.

The program teaches new homeowners about the pitfalls of owning their home, as well as costs involved with maintaining and running their real estate over the duration of the mortgage.

2. FHA Loan

This facility is one of the most popular programs for new homeowners in the United States. Using an FHA loan, the Federal Housing Authority provides the mortgage security on your home. As a part of the U.S. Department of Housing and Urban Development, (HUD,) the FHA agrees to insure the mortgage, removing the risk from lenders.

As a result, if you meet the criteria, you’ll find that most lenders are willing to work with you, even if you don’t have the credit score required to receive approval. By providing insurance to your home loan, the FHA reduces the risk of default for the lender, and they are willing to write you a mortgage.

Americans that receive approval for an FHA loan also get access to preferential interest rates from lenders, reducing your mortgage costs over the loan term. Most American’s in sound financial health require a 20-percent down payment if they want to stand a chance of receiving approval for a mortgage.

However, with the FHA loan, you only need a 3.5-percent down payment, making the cost of homeownership far more affordable for Americans. With a lower down payment and preferential interest rates, buying your home has never been easier. The FHA loan also has lower closing costs on your mortgage, further assisting affordability.

Even if you have a subprime credit score below the 580-threshold, lenders are still willing to work with you if you receive approval for an FHA loan. However, subprime candidates are required to pay a higher down payment, typically around 10-percent.

3. FHA Section 203(k)

This loan facility is an offshoot of the FHA loan, explicitly designed for prospective homeowners looking at purchasing a fixer-upper. If you’re considering buying a home that needs some tender loving care, then section 203(k) rehabilitation program is ideal for helping you recover the costs associated with the renovations and repairs.

When applying for this loan facility, you still get all the benefits associated with the FHA loan. However, the lender allows you to apply for renovation costs, based on the value of the real estate after you’ve finished the repairs. Lenders write the costs of the upgrades into the mortgage, adding the expenses into your monthly payments.

4. The VA Loan

The United States government wants to help veterans, as well as active servicemen and servicewomen, in purchasing their home. As a reward for your service to the country, and bolstering the national security, the government created the Veterans Association home loan.

People who qualify for the loan don’t need to make any down payment on their home in most cases. However, if a lender does ask you to make a down payment, it could be for as little as 0.5-percent. The program supports anyone who qualifies that’s looking for a home, even if you’re not a first-time home buyer.

By removing the need for a down payment, it significantly reduces the financial challenges associated with homeownership. Lenders also give VA loan applicants a preferential interest rate, helping them further reduce the costs of homeownership. Using a VA loan significantly reduces the financial stress of the situation, helping veterans and service people realize the American dream.

The programs also support the renovation of homes for better access for disabled veterans, writing in the costs of the access renovations into your mortgage.

5. The Good Neighbor Next Door Loan

The United States Department of Housing and Urban Development (HUD), sponsors this loan facility. It’s available for all Americans, not only first-time buyers. The HUD updates a list of homes eligible for the program every month, and if you want to take advantage of this loan, you’ll need to look at buying properties listed on the HUD database that are eligible for the Good Neighbor Next Door Loan.

Most of the homes on offer are in a dilapidated state and require a significant amount of work to refurbish the property. Typically, you’ll find these homes in low-income or rural areas across the United States. There are also limitations on this loan regarding your profession. The mortgage is only available to teachers, police officers, firefighters, or people that work in the emergency services.

The purpose of this loan is to move competent and qualified professionals into areas of the country that don’t have a large number of these types of people in the community. Therefore, to receive approval for your home loan, you’ll need to commit to living and working in the area for at least 36-months.

6. The USDA Loan

If you’re planning on leaving the city and moving to the countryside to start a farm, then the USDA loan is a fantastic facility. The United States Department of Agriculture issues these loans to people that are willing to contribute to the country’s agriculture.

At the moment, many farmers are under pressure to meet the needs for food security in the nation. With the floods of 2019 taking a significant toll on the agriculture sector, the government hopes to push more people into farming by offering this loan facility.

You also don’t need to be involved in the agriculture business to qualify for the USDA loan. Some suburbs of cities across the United States qualify for this loan facility, and if you are thinking about leaving the city behind you to stay in a rural community, the USDA loan can help you realize your dream.

However, there are a few qualifying criteria for this loan., You can’t exceed the income threshold for this loan, and the government requires you to pout a small down payment on the property as well. Applicants with credit scores of 640 or more receive priority status when applying for this loan, and as long as you meet the income requirements, you have a good chance of gaining approval.

7. National Homebuyer’s Fund

Some local realtors participate in the National Homebuyer’s Fund. By leveraging this facility, you can save up to 5-percent of the total loan value of the property you intend on purchasing. The NHF is a grant program endorsed and managed by the federal government. As a result, you don’t have to pay back the savings you make on the purchase of your property.

Low-income households are eligible for this program, and there are income thresholds involved with the qualifying criteria used by realtors and lenders.

8. Native American Direct Loan

The NADL, Native American Direct Loan, originated in 1992, intending to help Native Americans and their spouses purchase a property. These loans are available for homes built on federal trust lands. In the case of these loans, the Veterans Association is responsible for regulating and maintaining these loan facilities.

As a result, the terms of a NADL loan are very similar to Vas loans, with low-interest rates and minimal down payments required. However, in most cases, these home loans don’t need any down payment at all, and homeowners are not required to pay any private mortgage insurance (PMI).

The VA also facilitates a 30-year fixed-rate mortgage, as well as very-low closing costs for these mortgages.

9. The Energy Efficient Mortgage

The U.S government is making a concerted effort to reward prospective homeowners that want to move away from using the electrical grid. The EEM is a green initiative rewarding people that use sustainable energy in their home.

However, the EEM is not a stand-alone mortgage facility. It’s meant to bolster current mortgage programs like the VA and FHA, helping mortgage owners to receive a rebate for turning their home green. Not only does the RRM help you to acquire a home, but it secures your future by helping you save on the energy costs related to homeownership.

The energy-efficient mortgage is available for all prospective homeowners that have a plan to make their future home more environmentally friendly. The lender bundles the costs of the energy-efficient updates to your property into your primary mortgage, allowing you to make the upgrades after receiving approval for your mortgage.

Using an EEM is an effective way to reduce your energy costs in the future, with the help of the United States government.

10. Grants

All of the loans covered so far in this article are available at a national level. While you may have to find a local lender in your area that participates in the programs, they operate at a federal level across the United States.

However, it’s important to note that there are other facilities available at a local level to help first-time homebuyers achieve their goal of homeownership. People of all incomes and credit scores can apply for these loans, with lenders assessing criteria based on the incentives involved with the program.

Grants are financial incentives available to low-income families that are looking for a home. You can apply for a grant from you’re your state office, and depending on your financial situation, you may qualify for financial assistance to purchase a home.

However, the government may choose to provide a partial or full grant, depending on your financial position. It’s rare for applicants to receive a 100-percent loan, but it does happen depending on the state.

It’s also important to know that if you apply for a grant, there may be terms and conditions stating that you cannot move out of the house. The government does this to prevent people from taking advantage of the grant system. Some individuals may sell the home for a profit and move on to another area. If you do break the agreement and move, you may be liable to the federal government to repay the grant.

People who take on a grant also need to be aware of the tax recapture program. If you receive the opportunity to move out of your home after the time-frame in the agreement expires, you may experience heavy taxation on any of the profits you make with the sale of the property.

The Final Thought

These programs can help most Americans afford a home, reducing the level of homelessness that’s sweeping across the United States. Before you think that homeownership is out of reach for you and your family, check with your local lenders to see if you qualify for any of these special programs.

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