A Guide to First-Time Home Buyer Programs, Loans, and Grants

A Guide to First-Time Home Buyer Programs, Loans, and Grants

As a first-time buyer, there is much information to sort through as you navigate the real estate process. A good place to start is to look at the financial options available to help you with the costs of buying a home. Here is a guide to first-time home buyer programs, loans, and grants.

Types of first-time home buyer programs

In the early stages of buying a home, it is helpful to know what your options are. Countless programs are available to first-time buyers to assist them in receiving lower interest rates, payments, and other costs. Let’s look through the options available to help you find the best program for you.

Down payment assistance (DPA)

The price of a down payment depends on a few factors, including the mortgage cost, the buyer’s current financial standing, and the type of property being purchased. For example, the down payment for a residential property may differ from the down payment for an investment property. Down payments may range from about 3% to 20% of the price of the home.

Down payment assistance (DPA) is a loan to help cover the costs of the down payment for a home. There are a couple of different types of DPA options to consider when looking for financial assistance.

Down payment assistance loans

One option for down payment assistance is to take out a low or no-interest loan. There are several programs buyers can apply for, depending on their eligibility. Because these loans are granted at the state level, requirements for these types of programs will vary from state to state.

For Montana Housing assistance programs, a buyer must first qualify for a Regular Bond Program Loan to be eligible for down payment assistance from the state. A Regular Bond Program Loan is a long-term (30-year), low-interest loan made to assist first-time buyers whose income is below the set income limit. Each county or area has a different maximum income limit to determine eligibility for such assistance programs. For instance, Gallatin County has a maximum income limit of $126,240 for a household of two. If a buyer’s income exceeds the listed limit, they are not eligible for down payment assistance.

Montana Housing programs can provide a maximum of $15,000 for down payment assistance. The Bond Advantage Down Payment program can assist buyers with both down payments and closing costs. For this program, a buyer needs a 30-year mortgage and a credit score of at least 620. It also requires homebuyer education.

Down payment assistance grants

Down payment assistance grants are beneficial because they do not need to be repaid. As with the other types of loans, assistance programs will vary from state to state. The best way to access updated information is on the U.S. Department of Housing and Urban Development (HUD) website.

Government-backed loans

Government-backed loans help buyers get a home with a low down payment. These loans present a lower risk to the lender because they are insured by the government. This can be an ideal option for a buyer with a low credit score. This also allows the buyer to receive lower interest rates on their home. The loan programs currently available to buyers are administered through the Federal Housing Administration, the United States Department of Agriculture, and the U.S. Department of Veteran Affairs.

FHA loans are aimed at buyers who require a smaller down payment or those who have lower credit scores. Through an FHA loan, your down payment may be as low as 3.5%. USDA loans are for buyers in eligible rural areas, while active U.S. military service members, veterans, and their spouses may qualify for VA loans.

The benefits of homebuyer education

If you are unsure where to start when buying a home, you may benefit from taking a course for first-time homebuyers. With online and in-person options available, you can learn everything you need to know about buying a home, including different loan options and applying for a mortgage.

Some down payment assistance programs even require the buyer to complete a homebuyer education course before receiving assistance. This is the case for both programs available through Montana Housing. Even if education is not required for the assistance program you are applying for, it is still a valuable investment. The more knowledge you have going into the process, the smoother your journey will be.

Loans and grants for students

Buying a home may be the last thing on a student’s list of priorities, but keep in mind that there are programs available that make it possible. Taking out student loans can make it more challenging to get a mortgage, but students are still eligible for first-time buyer programs, including those through the Federal Housing Administration and Veteran Affairs. Students who took out loans for school may also be eligible for exclusive loans. As with other programs, availability varies depending on the state.

First-time home buyer program FAQs

What is a first-time home buyer?

Being a first-time buyer can mean you are buying a home for the very first time, but this term also applies to buyers who have not owned a home in over three years. If this applies to you, you may be eligible for the first-time home buyer programs discussed throughout the article.

Who qualifies for first-time home buyer programs?

Property ownership determines your eligibility for these programs. For example, anyone who owns a home — even if you are not currently living in it — is not eligible for first-time home buyer programs. Some programs, such as government-backed loans, may have stricter requirements. Most programs (including state and local programs) typically have an income requirement as well. Each program will have a list of requirements to help you determine your eligibility.

Getting started as a first-time home buyer

The more you know, the easier it is to move forward in your homeownership journey. This is an exciting investment, so team up with the professionals to ensure you reach all your goals. The local experts at the Zaremba Potts Group of The Big Sky Real Estate Co. are among the leading Realtors in Montana. They are dedicated and invested in helping you buy a home for the first time. For top-tier guidance as you navigate the home-buying process, contact Allen Potts and Matt Zaremba of Zaremba Potts Group today.

*Header photo courtesy of Shutterstock

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