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Your Own Home

Home-Buying Assistance Programs

There are a number of different programs available for first-time home buyers. Many people start the home buying process with one of these programs or with a community organization.

For example, in an Individual Development Account, or IDA, program, participating organizations match your savings contributions to help you save for a down payment or closing costs. (Closing costs are various charges associated with the transfer of property. The lender must disclose these costs to you.)

All home ownership IDA programs require you to complete financial education classes.

Many home-buyer assistance programs are offered by cities or local government offices. Many banks offer loan products in conjunction with these agencies.

Ask your lender or local government about the home-buyer assistance programs they offer.

Government loan programs are generally targeted to individuals and families with modest income. They will have one or more of these characteristics:

  Zero or low down payment requirements. For example, some require 3% down payment; some require 5% down payment with 3% having to come from the borrower and the other 2% coming from gifts or other grants.

  More flexible underwriting standards. This means the lender will consider non-traditional forms of credit history, such as rent or utility payments, and higher ratios of debt compared to your income.

  Longer payment terms than typical mortgage loans. This means your monthly payment will be lower.

  The program might require homeowner education. Homeowner education programs help people understand the home buying process. These programs cover such things as budgeting, finding a home, getting a loan, and maintaining a home.

  One example is the Home buyer Education Learning Program, or HELP, for FHA loans. You might be eligible for a reduction in initial FHA mortgage insurance under this program.

  Government program restrictions might include purchase price limitations, service charges, and higher loan origination fees.

Here is a summary of some of the most popular home-buyer Assistance Programs.

Federal Housing Administration (FHA) Insured Loans
The 203(b) is the most common FHA loan featuring:

  Low down payment
  Flexible qualifying guidelines
  Limited lender fees
  Maximum loan amounts

Department of Veterans Administration (VA) Insured Loans
Features of VA loans include:

  You must be an eligible veteran
  There are no down payment requirements
  Competitive and negotiable fixed interest rates
  Limitations on closing costs
  Longer payment terms

Federal National Mortgage Association (FNMA) Loans
The FNMA Community home-buyers Program Features:

  5% down payment
  Expanded debt-to-income ratios (33% and 38%)
  You must attend home-buyer education
  You must earn no more than the median income for the area in which you live
  One family principal residence

The Fannie 97 features include:

  Fixed rate
  3% down payment
  Expanded debt-to-income ratios (33% and 38%)
  You must attend home-buyer education
  You must earn no more than the median income for the area in which you live
  You must have saved enough money for one month advance payment in an account at closing

The Flexible 97 features include:

  You must have very good credit
  15-, 20-, 25-, 30-year terms
  3% down payment can be a gift or a grant from a nonprofit or government agency
  No borrower income limits or property location restrictions
  Up-front mortgage insurance costs are lower than FHA loans

The Fannie 3/2 features include:

  Fixed rate
  15- or 30-year term
  5% down payment - 3% from your own resources, 2% from a government agency, nonprofit organization, employer, or private foundation
  Expanded debt-to-income ratios (33% and 38%)
  You must attend home-buyer education
  You must earn no more than the median income for the area in which you live

United States Department of Agriculture (USDA) Rural Housing Services
The 502 Rural Housing Direct Loan is offered only in rural areas. Features include:

  You must have low income - between 50% and 80% of the median income for the area in which you live
  The loan can be financed at 100%
  Payments are usually 22% to 26% of your income
  You must not be able to obtain financing elsewhere

502 Single Family Housing Loan Guarantees features:

  You must earn up to 115% of the median income for the area in which you live
  You must be without adequate housing
  You must be able to afford the payments
  You must not be able to obtain credit elsewhere
  30-year term
  No down payment

502 Mutual Self-Help Housing Loans:

  Primarily used to help low and very low income households construct their own homes
  Intended for families unable to buy clean, safe housing through conventional methods
  Families must perform at least 65% of construction labor on each other's homes under qualified supervision
  You must be unable to get credit elsewhere
  You must be able to make payments
  Payments are usually 22% to 26% of your income
  33- or 38-year terms
  No down payment