What programs are available?
Are you starting to consider buying your first home? If you're pretty sure you will be living in the same area for the next five years, you earn enough to afford a mortgage, and you're prepared for the responsibilities of repairs and maintenance, then buying can be a really smart move. Assuming you've never purchased a home before, you will be what the real estate industry considers a "first-time home buyer." And this designation, nicely enough, comes with several advantages.
There are a number of first time home buyer programs that make it easier and more affordable for people like you to make their first real estate purchase. Basically, these first-time programs fall into two categories. There is the FHA loan, a type of mortgage that is backed by the Federal Housing Administration—and then there are state-specific first-time home buyer programs. Here's a closer look at both.
Contrary to popular belief, FHA loans are not available only to first-time home buyers. However, the loans do strongly cater to first-time buyers because the requirements are more forgiving than those of a conventional mortgage. To qualify for an FHA mortgage, you only need a credit score of 500 and a debt-to-income ratio of 50% of less. If your credit score is above 580, you only need a 3.5% down payment, and if your credit score is between 500 and 578, you need a 10% down payment. For first-time home buyers, this is much more realistic than the 20% down payment often required for a conventional mortgage.
Basically, taking out an FHA loan as a first-time buyer means you don't have to save as large of a down payment, and your credit score does not need to be perfect. This can enable you to buy a lot sooner than if you were to wait and try applying for a conventional mortgage. Most mortgage lenders do offer FHA mortgages, so you should not have any trouble finding a lender you feel comfortable working with.
State-Specific First-Time Home Buyer Programs
FHA loans are available in all 50 states, as they are backed by a federal program. Each state also has its own programs intended to make homeownership more realistic for first-time buyers. These programs may have lower down payment requirements. In some cases, they may even match money saved towards down payments over a certain period. They may even offer assistance with closing costs.
Which programs are available to you will depend, of course, on the state you live in. If you talk to a local bank, they should be able to give you the most up-to-date information. To give you a better idea of what these programs may offer you, take a look at a few examples:
Arizona: In Arizona, the Home Plus program is very appealing to first-time buyers. Under this program, you can enjoy lower mortgage insurance premiums if you put less than 20% down. You can also get assistance with closing costs.
Michigan: The Michigan State Housing Development Authority offers a program under which buyers only need to put 3% down. Down payment assistance of up to $7,500 is available.
Ohio: The Ohio Housing Finance Agency offers programs under which first-time buyers can get down payment assistance up to 5% of the home's purchase price as long as you do not sell or refinance for 7 years.
From FHA mortgages to state-sponsored programs, there are plenty of options available for first-time home buyers. Use these programs to your advantage, and you will be able to afford home ownership sooner than you think.