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First-time Buyers: How first-time buyer programs work

If you’re in the process of buying your very first home, there are some buying programs out there you may want to take advantage of.

First-time buyer programs are just that. They’re geared towards first-time homebuyers, and they’re available in cities and counties all across the nation.

Specifically, these types of programs aim to help provide first-time buyers with things like down payments and closing costs. Both are big upfront costs for buyers and can sometimes catch a first-time homebuyer by surprise.

Common first-time buyer programs:

  • Zero-interest loans
  • Grants
  • Deferred payment loans

How down payment assistance programs (DPAs) work for first-time buyers

There are thousands of different down payment assistance programs out there. In terms of DPAs, they’re offered at the state, county and even city level all across the U.S., so start by looking locally.

Keep in mind, not every lender may offer these types of programs, so you’ll want to do a little research into what’s available.

A DPA isn’t just for the down payment. You may also be able to use it for closing costs, but it probably won’t be enough to cover both.

There are some limitations and conditions for who qualifies. Likely, your income is taken into consideration. There may be some other requirements, as well.

First time homebuyer program and model of house.

How zero-down-payment loans work for first-time buyers

As for zero-down-payment mortgage loans, there are two main ones available. While not all first-time buyers qualify, they can be a good deal if you do.

USDA loans

The USDA’s zero-down home loan can be helpful for those who either have very little to put down as a down payment, or those with no down payment at all.

Generally, this type of loan takes into account your household income and your credit score.

There are some other restrictions, as well. Keep in mind, a USDA loan is only available in certain areas.

VA loans

If you’re a veteran or a current service member, you may find you qualify for a VA loan. Although only certain buyers are eligible to get this type of loan, it is a pretty good deal for those who qualify.

A VA loan typically has a lower rate than other mortgages out there, plus you won’t need a down payment.

How low-down-payment loans work for first-time buyers

There’s also the option of a low-down-payment loan guaranteed by the federal government.

FHA loans

It’s easier to qualify for an FHA loan than it is some other ones. Your credit score will help you get a better deal, but with an FHA loan your debt-to-income ratio can also be higher than it can with some other types of loans.

Conventional loans

Your down payment can be even lower with a conventional loan. It’s not backed by the federal government, but not everyone qualifies either.

You often need a higher credit score and a lighter debt burden in order to get a lower down payment

Finding help with closing costs

There are also some private and government-sponsored programs that can help first-time buyers with closing costs, as well.

Because closing costs can add thousands of extra dollars to the home buying process, it’s worth considering.

Closing costs= 2%-5% of loan

Avg $4,000-$10,000 for $200,000 home loan

To help with the cost, it’s worth looking around for any first-time buyer programs that can help you cover the extra fees and make the home buying process more affordable.

About the author

I am from Chicago, IL and I have been lending in this area for 20+ years. My team and I strive to give you an enjoyable mortgage experience while providing you the best programs and rates! I am also offering a FREE mortgage analysis to determine if refinancing is right for you.