First Time Home Buyer Programs

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First-Time Home Buyer Programs 

Homeownership has a lot of benefits, but it also comes with a few significant barriers to entry that first-time home buyers might not be prepared for. 

With many confusing terms and such large sums of money involved, many aspiring homeowners need a little extra support when they’re looking to purchase their first home, often in the form of financial help.

Fortunately, because homeownership is good for communities and the economy at large, there are plenty of programs and grants available to help get people into a home who otherwise might not be able to afford one.

To assist you in getting the help you need, here’s a run-down of home buyer friendly programs. While some of these are specific to first-time home buyers, many of them can benefit buyers of every experience level.

HUD Home Buyer Programs

The Department of Housing and Urban Development (HUD) offers many resources for educating and assisting hopeful home buyers. If you’re a first-time buyer who needs assistance but aren’t sure where to start, the HUD website can help you figure out what you need to do.

Not only is HUD a useful resource that can connect you to counseling, home loan and down payment assistance programs, but the department also has some programs of its own to help potential homeowners.

Many of HUD’s homeownership programs work by providing local governments or non-profits with grants that are then used at the discretion of those organizations to help their communities. However, there are a couple that are available directly to the public. 

Here is a link to specific HUD information for Wisconsin

Good Neighbor Next Door

The HUD Good Neighbor Next Door Sales Program aims to make housing affordable for teachers, law enforcement officers, firefighters and emergency medical technicians. To qualify for this program, applicants must:

  • Be employed full-time in one of these positions
  • Certify that they intend to continue this employment for at least one year past closing
  • Not have owned another home for one year prior to submission of a bid for purchase
  • Agree to live in the home as their primary residence for three years

With this program, a limited number of HUD homes in designated revitalization areas are available at a 50% discount to employees in these professions. At this time, Quicken Loans® doesn’t offer financing for homes purchased through this program.

HUD Homes

HUD also sells the homes it owns through the Single Family Property Disposition Program. These homes are FHA foreclosures available via auction on the HUD homes website.

If you’re hoping to get a good deal on a home, it could be worthwhile to take a look at the HUD listings in your area. Keep in mind, though, that not every HUD home will be a steal; these homes are sold as-is, meaning you’ll pay for any repairs that are needed.

To purchase a HUD home, you’ll need to work with a real estate broker who is registered with HUD. You’ll also want to make sure you have any property you’re considering inspected before you make an offer.

During the initial bidding period, HUD homes are generally available only to those who plan on living in the home, so you won’t have to worry about competing with investors.

FHA Loans

The Federal Housing Administration (FHA) is a division of HUD that provides mortgage insurance on loans made by FHA-approved lenders. If you’re unsure of whether you’ll be able to qualify for a mortgage, an FHA loan may be able to help you out.

Because these loans are insured by the federal government, the lender is protected from the risk of default, allowing them to have more lenient requirements for FHA applicants. This makes an FHA loan a good option for first-time home buyers and those with shakier credit histories.

What are the requirements to qualify for an FHA loan? FHA sets its own rules for the types of mortgages it insures; however, an individual lender may have its own requirements on top of that.

In general, you’ll need a credit score of 580 or higher to qualify for an FHA loan, and you’ll have to have enough cash to put at least 3.5% down.

Your allowed debt-to-income ratio (DTI) will typically depend on your credit score – lower scores will require a lower DTI, ideally keeping it below 43%, while better scores may be able to go up to 50%.

Those interested in an FHA loan should be aware that they’ll be required to pay a mortgage insurance premium either for the life of the loan if they make a down payment of less than 10%.

FHA’s 203(k) Rehab Loans

For first-time home buyers who dream of taking a fixer upper and making it their own but aren’t sure how to finance it, a 203(k) loan can help make that dream a reality.

A 203(k) loan works like a regular FHA mortgage while allowing you to roll the costs of any necessary repairs or improvements into the loan. Instead of having to take out multiple loans, including a construction loan, you only need to take out a single mortgage loan to cover your costs.

The cost of the rehabilitation must be at least $5,000. The amount you can borrow will be determined either by the value of the property before rehabilitation plus the costs of rehabilitation, or the appraised value of the property after rehabilitation.

To obtain a 203(k) loan, you’ll need to work with an FHA lender that offers this specific type of loan. Then, you’ll work with licensed contractors to get bids for all the work that needs to be done. You’ll probably want to work with contractors who have experience with 203(k) loans, as they’ll be familiar with the process and all the additional paperwork that goes into it.

Keep in mind that you are restricted to FHA and lender guidelines when it comes to the types of repairs you can do. For the most part, the repairs and renovations you’ll need to rehab on the home will be eligible, meaning you can use your loan funds to pay for them. However, certain things aren’t allowed, such as the purchase or repair of luxury items. Unfortunately, this means that you won’t be able to use a 203(k) loan to put a hot tub in the backyard.

VA Loans 

VA Loans make home financing more affordable for veterans, service members and their spouses. If you belong to one of these groups and are trying to get into your first home, a VA loan can help you do it.

These loans are guaranteed by the Department of Veterans Affairs. They offer a variety of benefits, including 0% down, more lenient credit requirements, no mortgage insurance and, often, better rates.

VA guidelines don’t establish a minimum credit score requirement and allow higher DTI than other loan programs. However, check with different lenders to see what their own individual standards are. Many lenders will require a minimum credit score of at least 620.

Unless you’re exempt, you’ll also pay a funding fee with a VA loan in lieu of mortgage insurance. This fee is usually less than the cost of mortgage insurance that you’d pay on other loans, and is often added to the loan balance.

The property you choose will need to meet VA requirements and be move-in ready, meaning that there aren’t any major problems.

Last, but not least, you’ll need to be eligible for a VA loan based on your length of service and the time period you served. You can check out the VA website for more information.

These are just a few options for first time home buyers, our team at Wisconsin Mortgage Company is available to help walk you through the loan process in all of our local Shorewest offices. Learn more at:

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Categories: First Time Home Buyers, Home Buying, Real Estate Tips, Shorewest Tips

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