LEARN ABOUT FIRST TIME HOME BUYER GRANTS

There are many obstacles that potential homebuyers may find when attempting to purchase a home.

For instance, passing a credit check is often a primary concern. Moreover, if your budget is tight, your larger concern may be finding a way to afford the home you want.

Furthermore, first-time homebuying can be particularly stressful. When unfamiliar with the process, you are more likely to encounter unpleasant surprises, such as unforeseen expenses and unexpected bureaucracy.

First-time homebuying is also stressful when you have a low income or a limited work history. In these cases, you may need some form of additional financial assistance in order to achieve homeownership.

The most common form of home purchasing assistance is a loan, otherwise known as a mortgage. However, you can also qualify for grant assistance.

These grants are similar to educational grants in the sense you do not have to pay granted funds back. The information below can help you determine if you qualify for a first-time homebuyer grant.

What is a First-Time Home Buyer?

Several grant opportunities are available to first-time homebuyers. However, it is important to understand how a first-time homebuyer is defined. You may think you cannot qualify for such a grant if you have ever owned property under any circumstances.

However, that is not the case. There are certain exceptions allowing you to purchase a home and broaden the definition of a first-time homebuyer.

As a general rule, the requirements for first-time homebuyer grants vary significantly based on the source of each grant. However, any such grant issued in association with certain federal organizations has a specific set of qualifying criteria.

These organizations include the Department of Housing and Urban Development (HUD) and the Federal Housing Authority (FHA). When applying for assistance authorized by those agencies, you must meet one of the following qualifications:

  • You have never owned a home.
  • You have not owned a home for at least three years prior to applying for assistance.
  • You owned a property that did not meet the structural codes and could not be repaired in a satisfactory manner without spending more money than it would cost to build a new home from scratch.
  • You were displaced due to divorce.
  • You have at least one child and owned a home with the child’s other parent, but you are now single.
  • The former residence you recently owned did not have a foundation that was fixed properly, thus it did not meet building codes and other regulations.

Discover the Different Types of First-Time Home Buyer Grants

First-time homebuyer grants are not offered directly by the HUD. Instead, the HUD distributes funds to state and local agencies. These agencies use these funds to offer first-time homebuyer grants and grant-like programs.

One of the most common types of first-time homebuyer grants available relates to down payments, thus helping you pay for some or all of the down payment required to buy a new home. Down payment grant funds are also used to cover closing costs associated with the home purchase.

Many down payment grants for first-time home purchasing are offered at the state or local level. However, some are offered by non-profit organizations at the national level as well. When you apply for one of these grants, you receive up to a certain flat-rate amount, such as $5,000. Alternatively, you are provided with a specific percentage of the purchase price of the home, such as five percent. Overall, the assistance caps vary by agency.

Another type of grant-like assistance is a forgivable second mortgage program. A forgivable second mortgage program is technically a loan. However, it functions as a grant, as long as you meet certain criteria. Such a program, if offered in your state, functions as a loan with zero percent interest.

With this grant, you may also have no monthly payment requirement to meet. Additionally, the loan balance is forgiven after a certain period of time as long as you meet the rules of the loan. For example, you may be required to remain in the home for a minimum number of years to qualify.

Furthermore, you may qualify for a matched savings grant program. To do so, you must set aside funds specifically to purchase your home. The funds are placed in a dedicated bank account at a participating institution.

For each dollar you deposit, you receive a “matching” amount from the agency offering the matched savings program to you. However, the so-called match is not always dollar for dollar. You may receive several dollars for each single dollar that you contribute.

Through the federal Fannie Mae Program, you may only qualify for first-time homebuyer grants after the fact. A division of Fannie Mae is the HomePath Ready Buyer Program. HomePath provides up to three percent of the cost of the home in the form of a rebate.

However, you cannot obtain the rebate unless you complete an online educational course provided or approved by Fannie Mae for home buyers.

Learn How to Get First-Time Home Buyer Grant Assistance

First-time homebuyer grant assistance is available at every level, from county to federal. The exact programs vary depending on the state where you apply. Additionally, be mindful that not all programs are offered by a level of government.

Some are offered by organizations with no direct government affiliations. To get federally-supported grant assistance at any level, you must perform certain actions. For example, complete a housing counseling class authorized by the HUD. You must also qualify to obtain a mortgage because grant funds must be used to pay only on a mortgage.

To get such a federally-approved grant, apply through a qualifying housing agency in your state. Requirements for private grant assistance may vary.

There are also home buyer grant assistance programs that cater to first-time homebuyers but are not controlled by the HUD or the FHA. These programs are often run by non-profit local organizations.

Your Guide is Here!

Click to Download Your Home Ownership Guide

The HUD maintains a partial list of such organizations in every state. Obtain such information from housing officials in your state by visiting your local housing office or accessing online state housing resources.