First-time home buyers are often eager to find the perfect place to call their own. While it can be exciting to start focusing immediately on properties, it pays to get your financial house in order first. That means carefully considering all options for financing before beginning your serious house hunt.
Some typical preliminary financing questions first-time home buyers might consider are:
But, one of the other questions first-time home buyers often ask, is:
One of the first things to know about home buyer grant programs is that the federal government does not offer grants to individuals, at least not directly. Instead, the federal government works with non-profit organizations and local governments to provide financial assistance and related services. The amount of these grants you could be eligible for will vary, depending on where you reside as well as a number of other criteria.
Grant programs are not meant to provide 100 percent financing, nor will they replace your need to quality for a home mortgage. Instead, grants and similar programs can provide some financial assistance to be used in conjunction with a mortgage loan.
Keep in mind as well, that anyone taking advantage of federal assistance for buying a home will almost certainly be required to take part in an educational counseling program sponsored by the U.S. Department of Housing and Urban Development (HUD). These programs are designed to help potential home buyers get their finances in order so that they can qualify for a mortgage loan.
There are several grants or similar incentive programs that may be available to you as a first-time home buyer, depending on your specific set of circumstances. In many cases, you do not need to be a first-time home buyer to qualify for these grants.
The HOME Investments Partnership Program, known simply as HOME, provides formula grants to states and municipalities that are used by communities, often in tandem with local nonprofit organizations. These grants are used to fund a variety of home-related endeavors, including purchasing, building and rehabilitating affordable housing for rent or ownership. They can also be used to provide direct assistance for low-income renters.
The program represents the largest federal block grant provided to state and local governments as a means of creating affordable housing for low-income families. Additional information on HOME can be found at the OneCPD Resource Exchange site here.
Individual Development Accounts are savings accounts specifically used for matching deposits of low- and moderate-income people for the purpose of making a large purchase, such as a home. For every dollar saved by the potential home owner, a local non-profit organization provides a match. The program is administered via a partnership between your bank or credit union and a local nonprofit or other program sponsor.
The program also provides financial counseling pertaining to the participant’s goals, such as home ownership. You can participate in the program for six months or for several years, but as soon as you have reached your goal, you are able to withdraw the funds. The Corporation for Enterprise Development serves as the umbrella organization for the program, but you can check on availability for opening an IDA in your area by checking here.
The Mortgage Credit Certificate (MCC) Tax Credit Program is a federal program administered locally. While not a grant program, it does offer a federal credit that can help reduce your potential federal income tax liability, freeing up available income that can be applied to your monthly mortgage payment. The program is often used by first-time home buyers to convert part of their annual mortgage interest into a direct dollar-for-dollar tax credit on their individual federal income tax return.
Low-income first-time home buyers may find assistance through HUD’s Section 8 Housing Choice Voucher program.
Just as it does with its rental participants, HUD’s Housing Choice Voucher program provides monthly financial assistance, but rather than going toward rent, the assistance goes toward homeownership expenses. HUD provides authorization to state governments and public housing authorities to deliver the program to qualifying families.
Because the availability and details may vary from location to location, HUD provides links to state administrators of the above programs and other local home buyer programs here.