There are many first-time homebuyer programs and grants available to help the first-time homebuyer, generally assisting with the down payment and closing costs.
We have listed some of the best programs, grants, and loans that will help you afford your dream home without needing to make a 20 percent down payment.
1. FHA
Insured by the Federal Housing Administration, FHA loans typically come with smaller down payment and lower credit score requirements than most conventional loans. First-time homebuyers can buy a home with a minimum credit score of 580 and as little as 3.5 percent down or a credit score of 500 to 579 with at least 10 percent down.
2. USDA loan
The U.S. Department of Agriculture, or USDA, guarantees loans for some rural homes, and borrowers can get up to 100-percent financing. USDA loans have income limits based on where you live and are geared toward folks who earn low or moderate incomes. You typically need a credit score of 640 or higher to qualify for a streamlined USDA loan.
3. VA loan
Qualified U.S. military members (active duty, veterans, and eligible family members) can apply for loans backed by the U.S. Department of Veterans Affairs, or VA. VA loans are a great deal because they come with lower interest rates compared to most other loan types and don’t require a down payment.
4. Good Neighbor Next Door
The Good Neighbor Next Door program, sponsored by the U.S. Department of Housing and Urban Development (HUD), provides housing aid for law enforcement officers, firefighters, emergency medical technicians, and pre-kindergarten through 12th-grade teachers.
5. Fannie Mae or Freddie Mac
The government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac set borrowing guidelines for loans they’re willing to buy from conventional lenders on the secondary mortgage market. Both programs require a minimum 3 percent down payment. To qualify, homebuyers will need a minimum credit score of 620 (though some lenders have different thresholds) and a relatively unblemished financial and credit history. Fannie Mae accepts a debt-to-income ratio as high as 50 percent in some cases.
6. Fannie Mae’s HomePath ReadyBuyer Program
Fannie Mae’s HomePath ReadyBuyer program is geared toward first-time buyers interested in foreclosed homes that are owned by Fannie Mae. After taking a required online homebuying education course, eligible borrowers can receive up to 3 percent in closing cost assistance toward the purchase of a HomePath property.
7. Energy-efficient mortgage (EEM)
Backed by FHA or VA loan programs and allows borrowers to combine the cost of energy-efficient upgrades into a primary loan upfront. Best for homebuyers who want to make their home more energy-efficient but lack upfront cash for upgrades
8. FHA Section 203(k)
Backed by the FHA, the loan calculates the home’s value after improvements have been made. You can then borrow the funds needed to pay for home improvement projects and roll the costs into one loan. Improvements must cost more than $5,000 and you’ll need to make a minimum 3.5 percent down payment. You’ll also want to make sure you’re working with a contractor who is familiar with 203(k) loans and their timeline.
9. State and local first-time homebuyer programs and grants
First-time buyer programs and grants, available through states or cities, for down payment or closing cost assistance. Best for first-time homebuyers who need the closing cost or down payment assistance
10. Native American Direct Loan
The Native American Direct Loan (NADL) provides financing to eligible Native American veterans and their spouses to buy, improve or build a home on federal trust land. This loan differs from traditional VA loans in that the VA is the mortgage lender.
You can also call us today at 239-682-7600 if you want to find out more or if you have any real estate-related questions.