subject: First Time Home Buyer Government Assistance [print this page] First time home buyers often struggle to get financing for their home purchase. Luckily for them, there were many options including sub-prime and piggy back mortgages through private lenders. These mortgages were typically very easy to get since down payments were very low or not required at all and credit scores didn't matter much either. Another option that many people were not aware of for financing was government mortgage assistance. The mortgage crisis has made it difficult to obtain financing nowadays and banks have very strict standards for obtaining financing if they haven't left the market already.
First time home buyers often have a lot of difficulty trying to get financing. The reasoning for this is that they typically don't have a lot of extra funds for a down payment of more than 20% of the purchase price or an established credit or low credit score. These factors all contribute to making it nearly impossible for people to obtain mortgages privately. First time home buyers may be looking at the federal government to help with financing.
A few government agencies help individuals obtain home loans, especially first time home buyers. The first is the U.S. Department of Housing and Urban Development (HUD) who offer first time home buyers financial assistance with closing costs and down payments. Another is the FHA or Federal Housing Administration who offer money to people for a down payment that may have average but not excellent credit.
FHA-Insured Mortgages
FHA mortgages are incredibly helpful for people who aren't able to come up with the funds for a 20% down payment. A mortgage broker based out of Nashville, TN Steve Curnutte stated that "FHA, by far and away, is the best option for first-time home buyers".
The FHA has a set of requirements for first time home buyers that are typically less than private lenders. The credit score needed to obtain an FHA mortgage is usually in the mid to high 600 range. Private lenders on the other hand require 720 or more. They are not without costs though because a fee of 1.5% of the loan is required along with a yearly payment of .5% of it. This is less than the average rate for private mortgage insurance though. Private mortgage insurance is required in loans when the buyer is not able to make the 20% down payment completely.
FHA mortgages are looking to get easier though in the future. A bill was introduced to change FHA mortgages by implementing new insurance premiums that are risk-based. The premium can be reduced if you have good credit or make a payment that is more than the required 3%. It has not been passed yet but is expected to be voted on shortly. These loans are sold by over 10,000 different mortgages and banks. These loans are similar to others and do require proof of income, driver's license, bank statement, and tax returns.
Each state is given funding by HUD to assist first time home buyers with purchasing a home. Funding can be used for closing costs, a down payment, or to fix the home up. Qualifications are set that state you cant make more than 80% of the median income for the area where you are living. The down payment and credit scores do not have requirements like through private lenders. Funding must be re-approved through Congress every year.
If you're looking to buy a home, check in your local area to see if there are programs that will work for you. Specific industries of employment may also assist first time home buyers with funding, such as teachers who can receive up to $7,500.
