First-Time Homebuyer Grant

The purchase of a home is a major goal of many adults within the United States. However, while many adults dream of being homeowners, the purchase of a home is a large investment and one that is not always easily accomplished. For those who cannot afford the purchase of a home, homeownership often remains a distant dream.

Not only must potential homeowners have the financial stability to purchase a home, but there are upfront and long-term costly investments that must be considered, including down payments, mortgage payments and property taxes. Mortgage applicants must also meet minimum credit score and debt-to-income ratio qualifications.

Mortgage lenders review applications for a home loan carefully. This review includes extensive consideration of the prospective homebuyer’s credit score, credit history and income in order to determine whether or not the applicant is a reliable buyer as well as the likelihood of full repayment. It is common for prospective buyers who have low credit score ratings to be rejected or, if approved, offered an extremely high-interest rate.

If you are struggling to afford a home, it is worth taking the time to learn about federal homebuyer grants that assist first-time homebuyers with the purchase of a home. You can learn more about these grant programs by reviewing the sections that have been provided below.

What are homebuyer grants?

There are several federal grant programs that offer assistance to qualifying first-time homebuyers. While most housing grant programs are provided by the U.S. Department of Housing and Urban Development (HUD), other federal departments, including the Department of Veterans Affairs (VA), also offer invaluable homebuyer grant programs.

Generally, qualifying for a federal grant program is easier than qualifying for a traditional mortgage. While applicants must still meet income, upfront cost and credit score qualifications, eligibility requirements are reduced through these programs and, thus, more families and individuals have the ability to become homeowners.

There are several types of home loans and federal programs that you may qualify for. Therefore, it is crucial that you take the time to learn more about the types of home loans that may be available to you in order to make an informed decision and select the one that best suits your needs.

What role does the government play in homebuyer grants?

The Federal Housing Administration (FHA), a subsidiary of the HUD, insures the cost of a mortgage in order to reduce the risk to lenders and lower eligibility requirements for prospective homebuyers that may not otherwise qualify for a loan.

To qualify, the HUD requires prospective homebuyers to attend a counseling course that assists in managing finances and serves to guide buyers through the home-buying process. This course is required in order to ensure that homebuyers understand the investment that they are about to make and are as prepared as possible.

Mortgage Assistance for Veterans

The Department of Veterans Affairs provides assistance with mortgages to qualifying U.S. veterans and service members. VA loans can assist qualifying buyers in the purchase of a home by reducing eligibility requirements for a mortgage, reducing closing costs and potentially eliminating down payments.

In addition to VA loans, the department provides housing grants to veterans with service-connected disabilities. These grants can be used towards the purchase of a new home or renovations of an existing home to make a home more disability accessible. In doing so, the VA assists disabled veterans in retaining their independence.

Homeownership Vouchers

If you do not qualify for a federal homeowner grant program, you may qualify for a tax credit that was created by the U.S. Internal Revenue Service (IRS). This tax credit provides qualifying first-time homebuyers with a reoccurring tax break. In addition to this tax credit program, you may also qualify for various government and state assistance programs that are available within your local community.

One such program is the HUD’s Homeownership Voucher Program, which provides funding to low-income families who currently live in public housing. Grants provided through this program can assist qualifying families in rising from poverty levels and provide these families the ability to purchase a home through subsidiaries.

The Homeownership Voucher Program assists new homebuyers by covering a portion of monthly mortgage costs and other household expenses, such as utility costs. While this program provides invaluable assistance to low-income families, the program has stringent eligibility requirements, including:

  • The program is only available to first-time homebuyers.
  • Applicants for the Homeownership Voucher Program must meet income limits set by local Public Housing Agencies (PHAs).
  • Applicants must have at least one household member that has held the same full-time job for at least one year.
  • Applicants must complete an HUD-approved counseling program on homeownership.

If you are interested in the Homeownership Voucher Program, you must contact the HUD or your local PHA.

Federal Housing Administration Loans

First-time homebuyers may be able to afford a home through an FHA loan. Unlike a traditional mortgage, the FHA insures the prospective homebuyer’s loan in order to make it easier for applicants to qualify for benefits. While applicants must still apply for a mortgage through an FHA-approved lender, eligibility requirements concerning income, credit score and debt-to-income ratio are generally reduced. Additionally, down payments can be as low as 3.5 percent.

In many cases, FHA loans can also help to reduce a portion of a homebuyer’s closing costs, including property appraisal fees, application fees and attorney fees. To determine whether or not you qualify for an FHA loan, contact an approved lender to start an application.

The Good Neighbor Next Door Program (GNND)

The GNND program provides substantial discounts to homebuyers who are public servants in order to help build up communities and promote homeownership. In fact, qualifying homebuyers can receive up to a 50 percent discount off of the cost of an HUD home. HUD homes are single-family homes that were previously foreclosed upon with an FHA loan. In order to qualify for GNND, applicants must be one of the following:

  • A law enforcement official
  • A firefighter
  • A teacher (K-12)
  • An emergency medical technician (EMT)

In addition to career-related eligibility requirements, homebuyers must agree to live on the property for at least three years. Should an applicant fail to live on the property for three years, they must repay the loan amount that would have otherwise been forgiven.