As a first-time home buyer (FTHB), getting a good loan can be crucial to your financial stability in the years to come. First-time home buyer programs can help you remain in control of the expenses associated with your loan and minimize the risk of debt. They come with some noteworthy benefits such as easier approval and lower fees. 

In this article, we’ll take a closer look at the benefits and key features of first-time home buyer programs. Equipped with your new knowledge, you’ll be able to confidently decide whether such a program is right for you.

Benefits of First-Time Home Buyer Programs

Buying your first home can be quite an experience, one that creates both emotional and financial challenges. First-time home buyer programs are designed to make everything easier for you. Here’s why.

Small down payment or no down payment at all

As a first-time home buyer, it can be hard to put aside enough money for the customary down payment that many banks require. One of the key benefits of first-time home buyer programs is that they require a considerably smaller down payment—or even none at all. 

That means you don’t have to defer getting a mortgage until you save enough money for a down payment. Or borrow money from friends or family.

Lower closing fees

Closing fees can add hundreds of dollars or more to your mortgage expenses. But first-time home buyer programs can limit all the fees associated with closing a deal. Different programs have different closing fee caps, so it’s important to check the fine print.

Grants

Sometimes, first-time home buyer programs may provide grants which you can use for down payments or closing fees. In some cases, you may also use grants to make improvements in the home after you move in.

Deferred payments

With deferred payments, your loan doesn’t charge interest and doesn’t need to be repaid until you pay off the entire value of the property. Restrictions may apply, so do check with your broker.

Possibly lower interest rates

With some first-time home buyer programs, you can get a mortgage with a low-interest rate. This usually happens when an organization subsidizes part of the interest or else helps you qualify for a loan with a better rate than you’d normally get. 

First-time home buyer programs are available in pretty much every state, but their features and benefits depend on their location and the organizations that back them up. Again, researching all your options is important.

How Can You Qualify for First-Time Home Buyer Programs?

The first and most obvious prerequisite is to never have owned a home before. First-time home buyer programs generally target couples and young families who are looking to move into their first self-owned home. However, some programs may consider buyers who have owned a property before but not in recent years.

Having a low or moderate income can also increase your chances of qualifying for this type of mortgage. By contrast, having a high income and owning a lot of assets could prevent you from joining such a program.

But what about your credit score? Do you need a great credit score to be eligible for a first-time home mortgage program? 

The good news is that even if your score is below average, you may still qualify for some of the programs. A good score always helps, but it’s not always a prerequisite.

What to Watch Out For

So far, we’ve talked about the benefits of first-time home buyer programs. When considering joining such a program, it’s important to consider some of the limitations you may have to face, too. These limitations are generally not deal breakers. Even so, you want to be aware of them and consider their long-term impact.

Property value restrictions

With a first-time home buyer loan, you may not be able to buy a very expensive property. Instead, you may have to turn your attention to medium and low-value properties. The amount you can borrow depends on the area where you want to buy and the organization providing the loan.

Geographical restrictions

Some programs try to promote the growth and development of certain areas. This means that you may not be able to get a first-time home buyer loan to buy a property in a posh neighborhood.

Fewer loan options

You may not have the option to choose a variable rate mortgage or a different term. Your only option could be, say, a 30-year fixed rate mortgage. But there are exceptions to this, so it’s important to check with your mortgage broker.

Possibly high insurance

You may not need private mortgage insurance, but you may have to pay insurance offered by the loan program. In some cases, at least, this is not cheap.

Another important thing to remember is that first-time home buyer loans are meant for people who will live in the property they want to buy. If you want to rent the property after purchase, you will not be able to do so—the property you buy must remain your primary residence.

Types of First-Time Home Buyers Mortgage Programs

If you’re considering getting a first-time home buyer loan, you may want to consider the following programs. These programs have been developed for people with low credit scores, small down payments, or who live in specific regions. Some cater to specific categories of borrowers, such as military personnel or law enforcement officers.

• Federal Housing Administration (FHA) Loans
• U.S. Department of Agriculture (USDA) Loans
• U.S. Department of Veterans Affairs (VA) Loans 
• U.S. Department of Housing and Urban Development’s Good Neighbor Next Door Loans
• Native American Direct Loans (NADL)
• Freddie Mac or Fannie Mae loans with a low down payment
• Local first-time home buyer programs and grants

The Wrap Up

If you’re looking to buy your first home, first-time home buyer programs can make your life easier. They can help you overcome some of the main challenges of getting a mortgage including down payments, high-interest rates, and low credit scores. They can help you build a financially stable future in a home that you and your family will enjoy living in. 

That said, it’s important to fully understand all the aspects of first-time home buyer programs before joining one. And for that, find a mortgage lender who understands your situation and can provide the expert assistance you need.