$5000 First Time Home Buyer Grant. A first-time homebuyer program is for borrowers who want financial assistance toward purchasing a home. Although most of the programs on our list are referred to as “first-time homebuyer programs,” many state governments consider you to be a first-time buyer if you haven’t owned a home in the last three years.
$5000 First Time Home Buyer Grant
If you’re buying your first home, you might be eligible for financial assistance from your state government. States offer low-interest mortgages, cash for down payments and closing costs, and tax credits for borrowers at low-to-moderate income levels. There are several types of programs for novice homebuyers:
Mortgages for new buyers typically come with more lenient restrictions surrounding your credit score and debt-to-income ratio, and some even offer reduced interest rates. For most of the programs listed, you need to get a mortgage through a government agency to qualify for any of its other first-time homebuyer programs.
Many companies offer down payment and/or closing cost assistance. Usually, you’ll receive a predetermined amount of dollar, and you have the choice to put the money toward either your down payment or closing costs.
Down payment or closing cost assistance can be given either as a loan or as a grant. You have to pay back a loan, but some organizations fully or partially forgive the loan after a certain amount of time. Some require monthly payments, and others ask you to repay the loan when you sell or refinance the house, or when you completely pay off your mortgage. You do not have to repay a grant — it’s a gift from the state.
Some states have tax credit programs, which let you claim credits on your federal taxes and save money. A program lets you claim a percentage of the interest paid on your mortgage that year, up to a certain dollar amount. For instance, you might be able to claim 50% of the interest paid, up to $2,000 per year.
How To Apply For A First Time Home Buyer Program
Firstly, note that you don’t apply for a program directly through the government agency or department that’s offering it. Instead, you visit a lender that offers loans through that organization. For example, if you live in South Dakota, you’ll apply for a mortgage through an SDHDA-approved lender. You’ll find the list of participating lenders on the SDHDA website and apply for a South Dakota mortgage with the lender you choose. The lender is also the one who will approve and process any applications for down payment assistance, closing cost assistance, or tax credits.
Most agencies provide a list of participating lenders on their websites. It’s common for the government to limit which type of mortgages qualify for assistance. Many states require you to get a 30-year fixed-rate mortgage to receive further assistance. Many states require you to attend a homebuying educational course before receiving assistance.
Other First Time Home Buyer Programs
Choosing a state-sponsored program is a great way to get assistance as a first-time homebuyer, but you have other options.
Government-backed loans which include ones backed by the FHA, VA, or USDA allows you to buy a home with smaller down payments, higher debt-to-income ratios, and lower credit scores than conventional loans. You can also get major discounts if you fall into specific categories.
For example, you could get 50% off the listed home price through the Good Neighbor Next Door program if you’re a teacher, firefighter, law enforcement officer, or emergency medical responder who lives in a “revitalization area.”
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