First Time Home Buyer Programs You Must Know About in 2021

First Time Home Buyer Tips

First Time Home Buyer Programs You Must Know About in 2021

August 24, 2021

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Nothing you will ever do in your lifetime is likely to make you as much money as buying a home and living in it.” – David Bach

Buying your first home is a big task. It requires financial planning, having enough savings to make the down payment, and also having a genuine, continuous source of income to ensure that you will be able to pay monthly mortgages.

To help first time home buyers fulfill their dream, the U.S. Government offers several grants and programs at the Federal and State levels.

In this post, we are going to talk about all of the benefits, including grants, government support programs, and tax benefits that will make your journey as a first time home buyer easier.

Let’s get started.

Who qualifies as a first time home buyer? / What is a first time home buyer?

Hearing the term “first-time home buyer”, you’ll probably assume the term means anyone who is buying a home for the first time. However, that’s not technically true. According to the U.S. Department of Housing and Urban Development, a first time home buyer is someone:

  • Who has not been a principal owner of a residence during the previous three years (ending on the date when the property was purchased)
  • Who owned a home with a former partner or spouse while being married, and is now a single parent
  • Who is a homemaker and who only owned a home with their spouse and is now displaced
  • Who has been the owner of a property which was not complying with the local/state/model building codes
  • Who owned a principal residence, which is not fixed permanently to a foundation

If you fit in the criteria described above, then the information shared in this post will help you get one step closer to your dream of owning a home.

First Time Home Buyers Programs                                                                                                                                          

Now that we have a clear understanding of who a first time home buyer is in the eyes of the government, let us move to the question – what is a first time home buyer program? It is quite easy to figure out that financial help and support programs offered by the federal and local governments to encourage people to buy their first home are called first time home buyer programs.

Listed below are some of the first time home buyer programs that you need to know about before buying your first home:

1. U.S. Department of Housing and Urban Development (HUD)

The first thing you need to know here is that HUD does not offer any grant directly to first time home buyers. However, it provides funds to states and municipalities for their specific programs, which in turn can be beneficial for you as a first time home buyer. Therefore, the first place you need to look for assistance when planning to buy a home for the first time is the HUD website.

You can find a lot of useful information on the HUD website such as local resources that includes the contact information of local, state, and federal elected officials, HUD-approved housing counselling to help you with buying, renting, defaults, foreclosures, reverse mortgages and even with credit issues, and lastly, you can find information about down payment assistance in the form of secondary financing, which is offered by various nonprofit and government agencies. 

It is worth mentioning here that HUD is responsible for funding agencies that provide housing counseling. You can get in touch with these agencies to get expert help on buying a home, mortgages, foreclosures, and a lot more.

2. Local Government Programs

The second place to look for assistance as a first time home buyer is the local government. Different states in the country have different first time home buyer programs available.

For instance, if you are a first time home buyer in Texas, New York, and Georgia, you can get financial assistance on the down payment of a house by qualifying for grants. To qualify, factors like the price of the property, and your income play an important role in the eligibility for these programs.

You can get all of that information about local governments and how to contact them here.

3. Native American Options 

The third resource in this list is Native American first time home buyer programs under section 184. If you are a native american, and looking to buy a property that will be your primary home, then you can avail some great financial benefits, such as: 

  1. Having to pay a down payment of only 2.25% on loans over $50,000 and only 1.25% on loans under $50,000
  2. Getting a loan at a rate of interest according to market standards and not according to your credit score

You can check out the official website to know all of the details about this program.

4. Federal National Mortgage Association (FNMA)

FNMA offers a program named HomePath ReadyBuyer under which it provides assistance to first time home buyers who are planning to get a fixer-upper. As part of this program, you need to complete a mandatory HomePath Ready Buyer program that will prepare you for your purchase. Once you complete the program, you can expect to get up to 3% assistance in the closing costs.

If you want to know about the program in more detail, you can visit their official website here.

5. Downpayment Toward Equity Act

Although it is just an Act, and is subject to change, the good news is that on April 14, 2021, lawmakers introduced the Downpayment Toward Equity Act. If this act is turned into a law, every first time home buyer will become eligible to receive $25,000 in cash for buying their dream home.

Here are some eligibility criteria that an individual must meet for this grant:

  • Be a first time home buyer
  • Fulfill the income limitations in their area
  • It must be his/her primary property (no second homes)
  • Have a government-backed mortgage
  • Should be a first-generation home buyer

The goal of this act, as stated in the official document, is “To provide downpayment assistance to first-generation home buyers to address multi-generational inequities in access to homeownership, and to narrow and ultimately close the racial homeownership gap in the United States, and for other purposes.”

6. FHA Loans

Another resource that you look up to for some amazing first time home buyer programs is the FHA or Federal Housing Administration. Helping people with their dream of becoming a homeowner since 1934, FHA can help you find lower downpayment options, and various state offered home-buying programs.

Besides, you can also get all of the information about your rights and fair housing practices on its official website.

7. IRA funds

Lastly, you can always resort to your IRA funds. Every first time home buyer is eligible to take an early withdrawal of up to $10,000 out of their Roth or Traditional IRA portfolio earnings. In normal conditions, you have to pay a 10% penalty for this withdrawal. However, first time home buyers are exempt from this penalty.

Another important thing worth mentioning here is that the withdrawal limit of $10000 is per individual. If you are a couple, then you can withdraw up to $20,000 from your individual IRAs and use this money without any penalty. But remember, you must use this money within 120 days of withdrawal or you will have to pay the penalty.  

An important thing to remember about this program is that even if you have owned a home in the past, you can avail of this benefit. That’s because in the eyes of the IRS you are a first time home buyer if you have not owned a personal home in the last three years.

Summing it up

Choosing to buy a home is a big decision to make but it’s an even bigger investment. And, getting any sort of assistance in making that purchase come true can be a blessing. As you can see, there is a lot of help available out there for first time home buyers. All you need to do is do a little research and see whether you are eligible for the help or not.

Not only can you get financial help from various programs, but you can also always gain useful information about your housing rights, the local and federal housing development, grants, and a lot more on their official websites.

All the best!