Making the leap from renter to homeowner is the experience of a lifetime. It runs the whole gamut of emotions from exciting (touring potential homes and decorating them in your mind) to exhausting (offers, counter-offers, escrows and paperwork). Doing your homework ahead of time can make all the difference in your home buying experience, and it’s well worth the effort. If you’re about to start down that road, and this is your first time, there are plenty of resources to help guide you. Our Steps to Buying a Home
blog, for instance, is a great place to start (and has a cool chart). Many financial institutions also have programs in place designed to help first-time homebuyers overcome some of the obstacles they might face. There are also government programs created for the same purpose.
First-time homebuyer programs come in many shapes and sizes – let’s see if one works for you!
What is a first-time homebuyer program?
Essentially, a first-time homebuyer program helps people looking to make their first home purchase by incorporating special features into the loan, such as:
- An allowance for a low down payment (or no down payment)
- Down payment assistance (sometimes in the form of a cash grant)
- Subsidized interest payments
- Limits on fees the lender can charge
- Loan forgiveness in the case of default
- Deferred payments
- Special interest rates
These are just a few ways first-time homebuyer programs can be structured.
Is a first-time homebuyer program right for me?
Many times a first-time homebuyer program is exactly what a purchaser needs to help get them from window-shopper to homeowner. Like any loan program, though, they should be researched thoroughly to make sure they fit your needs. Some programs, for example, may include purchase price limits on properties, or income restrictions for borrowers. They may also have some requirements for the physical condition of the home. This makes sense, as the institutions that offer them want to make sure the programs are being used to help those who actually need the help. But if you’re looking at (and can afford) a house that’s outside those limits, you probably don’t need first-time homebuyer assistance and may qualify for a more cost-effective program that fits your financial situation.
Additionally the loan (like some other types of loans) may require you to live in the house you purchase. That just means you can’t use the program to buy a house you plan to rent out. Some programs also have limits on what types of loans they apply to.
Finally, if you’re looking at a first-time homebuyer program, make sure you’re thinking big picture and planning ahead – not just considering what will get you into the home right now. With some programs, you may be required to share the burden of increased home values with the lender, or you may jeopardize the benefits of the program if you sell your home too soon.
I should probably note at some point that you don’t always have to be a first-time homebuyer to take advantage of the program. Some programs allow purchasers who have owned a home in the past to use them, so long as they haven’t owned a home recently (like in the last three years). Other programs, like the Greater Nevada programs referenced earlier may be designed to help first-time homebuyers but be open to other borrowers as well.
Basically, if you don’t need the program – i.e. you can afford a decent down payment, you can afford a mortgage on the higher end of the price spectrum, and you’re confident you can get a good rate based on your credit – then kudos to you for reading this far into the blog. If you’re thinking of buying a new home and any of these benefits sound intriguing, you may want to start researching programs that fit your needs. We always encourage you to sit down with a Mortgage Consultant who can help walk you through your options and simplify the process for you.