First-Time Homebuyer? Here are All the Various Programs You Should Know About

Buying a home is one of the biggest financial moves you’ll make in your lifetime. Unfortunately, it can also be one of the most stressful, especially if you’re a first-time homebuyer. The whole process can be confusing and overwhelming for first-time buyers, and it doesn’t help that there are dozens of options available that you may or may not be eligible for.

Before researching your options, you must understand that these programs are still traditional mortgages in that you’ll be paying back a bank and not the government, so you’ll need to have a plan for how you’ll stay on top of your mortgage payments. Plan ahead by using something like this payoff calculator so that you’ll know just how long you’ll be on the hook for this mortgage and whether it’s a viable option or if you should wait until your financial situation is better.

If you’ve crunched the numbers and are ready to start house hunting, here are the top programs available for first-time homebuyers like you.

FHA loans

FHA loans are the most flexible of the federal mortgage programs out there because they can be used to buy your personal residence or multi-family property with a maximum of four housing units. FHA loans require only 3.5% down and are backed by the Federal Housing Administration. Many first-time real estate investors will use FHA loans to secure their first investment property but this program is designed for first-time homebuyers, too.

To qualify, you must:

  • Have a credit score of 580 or higher to be eligible for a 3.5% down payment
  • Have a credit score of 500 – 579 to qualify for a 10% down payment
  • Live in the property for at least one year
  • Purchase a one-to-four housing unit property

Freddie Mac’s “Home Possible Mortgage” program

The Home Possible Mortgage program is designed for low-to-moderate-income home buyers with less than stellar credit. The program offers a minimum down payment of only 3% and has no credit score requirements.

To qualify, you must:

  • Earn less than 80% of your area’s median income.

Fannie Mae’s “HomeReady Mortgage” program

The HomeReady Mortgage program was created for those with decent credit but may not have enough money for a typical down payment (usually around 15% – 20%). Like Freddie Mac’s program, HomeReady Mortgage requires a down payment of only 3%, which can be sourced from several places, including gifts, grants, or other loans.

To qualify, you must:

  • Earn less than 100% of your area’s median income
  • Have a credit score of 620 or higher

HUD’s “Good Neighbor Next Door” program

The Department of Housing and Urban Development (HUD) has a program that can help reduce the purchase price of a HUD property by up to 50% for those who work in eligible fields.

To qualify, you must:

  • Be actively employed as a law enforcement officer, educator, emergency medical technician, or firefighter
  • Plan to reside in the home for no less than three years
  • Purchase a home that’s located in a HUD-approved “Revitalization Area.”
  • Borrow a second “silent” mortgage that’s worth the same amount as the price discount. For example, if you’re approved for this program and can purchase a $100,000 home for $55,000, you would need to carry a second mortgage for the remaining balance of $45,000. No payments or interest will be required on the second mortgage unless you fail to meet the three-year occupancy requirement.

The bottom line

There is a lot of information for homeowner assistance programs, which can be confusing. It is crucial for each program to know how much you can borrow, how much you can qualify for, whether you are eligible, and how to apply. Keep this guide handy for when you’re ready to start seriously looking for your first home and stay on top of your finances, too. That way, you’ll not only have a higher chance of getting your mortgage application approved but will be an easy candidate for these services to want to work with.