As a first-time home buyer, you have many options for financial assistance, but grants stand out from other types of aid in one crucial way: You never have to pay the money back. You can use grant money to pay for your down payment on a house and the closing charges you’ll have to pay before you move in. Even people who have bought a home are eligible for several funding programs.
First-time homebuyer grants are different from other down payment aid programs since they are free. These programs can help you finance a home now, but they have conditions that must be met in the future.
8 grants for first-time homebuyers
1. Program for HomePath Ready Buyers
A homebuying program from Fannie Mae, one of two government-sponsored companies that support the mortgage industry, is called the HomePath Ready Buyer program. You can receive up to 3% of the cost of your new home through this program to help with closing costs. However, there are restrictions on what you can purchase because you can only be approved if you’re purchasing a HomePath property, a Fannie Mae-owned foreclosure. You must also finish a course on homebuyer education.
2. Fund for National Homebuyers
The nonprofit National Homebuyers Fund provides housing grants for first-time home buyers with down payments and closing costs that can equal up to 5% of the cost of your home. To be eligible, you do not need to be a first-time home buyer but locate a mortgage lender participating in the program.
3. Grants offered by Bank of America
America’s Home Grant and Down Payment Grant programs from Bank of America both provide grants to assist with a down payment and closing costs. The Down Payment Grant offers up to $10,000 in down payment assistance, whereas America’s Home Grant offers up to $7,500 in lender credits for closing costs. But Bank of America is where you’ll have to get your mortgage, and there can be tax repercussions for the down payment grant.
Chase Homebuyer Grant
You may qualify for a grant of up to $2,500 from Chase bank if you’re buying a property in a census tract with a “poor to moderate income,” according to the government. Additionally, the bank provides borrowers in thousands of predominantly Black neighborhoods across the United States homebuyer subsidies of up to $5,000. The closing costs are covered mainly by these monies (but can also go toward your down payment, depending on how the costs shake out). You can find out if your location and circumstances are acceptable with the help of your loan officer.
5. The Good Neighbor Next Door program
Even though the Good Neighbor Next Door program technically comes under the “forgivable loan” category. The US Department of Housing and Urban Development’s program provides a 50% discount on homes in designated revitalization areas to law enforcement officials, educators, firefighters, and emergency medical technicians. You can purchase the property for 50% less than the list price without paying back the discount as long as you stay there for three years. You won’t be able to purchase any house, just like with the HomePath program.
6. Act Towards Equity Downpayment
The Downpayment Toward Equity Act, introduced in the summer of 2021, will give first-time homeowners from first-generation families a stipend of up to $25,000. To qualify, you must be the first person in your family to buy a house. The regular reward would be $20,000, and those who meet the criteria for “socially and economically disadvantaged individuals” would also get an additional $5,000. Note that: The proposal is still a bill.
Forgivable loans are the most closely related to grants since they may become free with enough time spent in the home. To help with a down payment, you can borrow $5,000 monthly over ten years, lowering the loan debt. A portion of the loan will need to be repaid if you move before that period has expired. But if you stay in the house for ten years, you’ll get a full pardon.
Individual Development Accounts
Individual Development Accounts (IDAs) are matched savings accounts created for people who meet specific criteria for employment and income, often those with modest incomes. IDAs are provided by a few private NGOs and public housing authorities. They typically offer a dollar-for-dollar match, up to a predetermined amount, for financial goals, such as a down payment and closing costs.
How to be eligible for a grant for first-time homebuyers
First-time homebuyer grants are only available to some applicants. Depending on your income and where you want to live, these programs typically target borrowers who fall under the low- or moderate-income borrower category. While there are different eligibility restrictions, the following features are included in most grant programs:
Income restrictions: Many programs classify households earning 80% or less of the area median income (AMI) as “low-income” and only allow individuals in that range to participate. The income restrictions also change according to the size of the household.
Limits on home prices: You can also be constrained by a set budget. Again, these restrictions depend significantly on the state of the local property market.
Your contribution to the purchase: Many grants need the homebuyer to contribute, even if you will receive aid. A typical request is either 1% of the purchase price or $1,000. (Whichever is greater).
Your position as a resident: Generally, you cannot receive a grant to assist in purchasing a home you intend to rent to another person.
Additional education: Many grant programs demand that you pass a course on homebuyer education before you can get the money.
How to locate regional or national grants for first-time homebuyers
You can receive financial aid from a business local to you in addition to grant programs offered nationwide (or where you want your home to be). Start evaluating your choices right here.
Additionally, seek counsel from your real estate agent. These experts can direct you to grant programs because they have already gone through the process. They may also assist you in seeing neighborhoods and particular properties that meet your zip code and purchase price specifications.
There is usually minimum credit score criteria for grant programs. Review your credit record and credit score before applying. When you’re prepared, submit your online application. Get extra financial aid because you can apply for many programs.
You can ease into homeownership with the help of the government subsidies mentioned above for first-time homebuyers. To determine your eligibility, you should carefully review the requirements for each program. Being a first-time home buyer is exciting; these programs can help you fulfill your dream of purchasing a home.