Loan & Grant Programs First-Time Home Buyers Should Know About

Originally posted by atproperteis - athome

Purchasing a home is a major milestone for anyone, let alone a first-time homebuyer. And one of the biggest hurdles to clear is saving for a down payment. Fortunately, for first-time buyers, there are plenty of programs available to help achieve your dream of homeownership faster – and often with lower closing costs, mortgage rates and monthly payments. In this blog post, we’ve broken down some helpful programs available to first-time buyers at both the national and local level. If you still have questions, your @properties Christie’s International Real Estate agent and Proper Rate loan officer can help. Start here:

The Program: Proper Rate’s HomeReady Special Purpose Credit Program (SPCP)

Use Case: First-time Homebuyers Who Need to Bridge the Gap Between Savings and Down-Payment Needs

The Lowdown: This program eases the financial burden of upfront costs by providing a minimum of $5,000 in down-payment and closing cost assistance and an additional 1% of the sales price or $3,000. These funds can be used to cover anything from the down payment to moving costs. Currently, this program is available in select, eligible census tracts in over 20 metropolitan areas in and around Chicago. Proper Rate is one of the few lenders that offer this program.

The Program: FirstHome+

Use Case: Markets Where Housing Costs Are Above the National Average

The Lowdown: Higher interest rates and rising home prices have challenged first-time buyers – even those earning six figures. FirstHome+ clears a path for many of these buyers by eliminating certain loan terms and upfront fees for households earning up to 120% of area median income in high-cost areas. That includes Chicago, where households earning up to $126,480 can still qualify for this program.

The Program: Freddie Mac BorrowSmart Access Special Purpose Credit Program (SPCP)

Use Case: Buyers Who Earn More than the Area Median Income

The Lowdown: Another program that helps buyers earning more than the area median income is Freddie Mac’s BorrowSmart Access, which offers a $3,000 grant to households earning up to 140% of the area AMI. Keep in mind that $1,500 of the funds is taxable as income and needs to be declared come tax season.

“My clients have benefited incredibly with Freddie Mac’s BorrowSmart,” says Chris Varco, VP of Mortgage Lending at Proper Rate. “With the 140% AMI feature, this program has opened the door for many first-time home buyers that previously made too much to take advantage of another program.”

The Program: Federal Housing Administration (FHA) Loans

Use Case: First-Time Buyers Who Need Down Payment Assistance and May Not Qualify for Conventional Mortgages

The Lowdown: Although most lenders require a minimum credit score of around 650, you can still qualify for an FHA loan with a credit score as low as 500. For applicants with credit scores of 620 and above, down-payment requirements start at just 3.5%. (Below 620, the minimum down payment is 10%).

That said, it’s important to consider other costs if you do opt for a low down-payment option. FHA loans may come with Mortgage Insurance Premiums (MIP), which require payment throughout the loan’s lifetime. MIP is designed to protect lenders if a borrower defaults on their FHA loan.

The Program: Illinois Housing Development Authority (IHDA):

Use Case: Grants and Loans for Down Payments

The Lowdown: The IHDA is a popular resource for down-payment assistance in Illinois. It offers various grant options, including forgivable ($6,000), deferred ($7,500), and 0% interest loans ($10,000 spread over ten years).

Next Steps: Find Your Home Loan
Understanding these first-time homebuyer programs is a great first step. However, examining and comparing features and interest rates can get tricky. That’s where a qualified mortgage lender like Proper Rate comes in. Your loan officer will walk you through these options and explore others to find the loan program that best meets your needs.

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