If you’re struggling to qualify for a mortgage, then you may qualify for government mortgage and down payment assistance programs. There are even home loans for first-time homebuyers and programs for new home buyers of special populations, like indigenous peoples and veterans.
Interested in becoming a homeowner? Continue reading to explore some of the housing assistance programs available to homebuyers.
The Federal Housing Authority (FHA) backs mortgage loans to low-income families and others who are struggling to purchase a home. FHA loans are not money from the government. Instead, they’re a government-backed loan provided from banks and other lenders who offer you a lower interest rate, require a lower down payment, and may be more flexible with program requirements like debt-to-income ratios and credit scores.
With an FHA mortgage loan, you can often get a mortgage for a down payment as little as 3.5% of the purchase price. Some buyers may even qualify for zero-down mortgages.
However, these qualifications depend on your credit score; the higher your credit score, the lower your down payment may be. You can apply for an FHA loan after reviewing your qualifications with a mortgage lender who offers FHA loan products.
First-Time Homebuyer Assistance
The FHA has mortgage loans and assistance programs specifically for those who are buying their first home. When shopping for mortgage lenders, it may help to ask about first-time homebuyer FHA loans to determine if you qualify.
Some low-income first-time homebuyers may qualify for homeownership vouchers through HUD. The Housing Choice Voucher (HCV) homeownership program works like Section 8 in that you get to choose which house you want to buy, within a certain purchasing price limit, and get part of the cost subsidized.
That means you can buy your house and get help paying your mortgage payment every month. This program does not offer down payment assistance, however.
Homebuyer Grants and Other Assistance
Unlike loans that have to be repaid and require you to pay more in the form of interest, a grant does not require you to pay it back. Grants for home buying may cover the cost of a down payment and/or the closing costs you would pay once the sale goes through.
These programs are typically reserved for very low-income homebuyers. However, there are similar programs that can help reduce upfront costs.
Individual Development Accounts (IDAs) are savings accounts for those who meet certain work and low-income standards where every dollar contributed is matched by the institution. This can help people save for a down payment and closing costs. You can find IDAs through public housing organizations and even some private, non profit organizations that help low-income families.
Another option is a forgivable loan, which reduces the monthly payment amount over time and gets forgiven if you make a certain number of payments. For example, you might get a forgivable loan for a down payment, and if you stay in the home for the period of time outlined in your loan agreement, you can get the remaining balance forgiven.