[Buyer]
First-time homebuyer mortgage programs are not just for the actual first-time homebuyer. You can also be a past property owner and still qualify for a first-time homebuyer program.
According to U.S. Department and Housing and Urban Development the FHA prioritizes helping first- time homebuyers. The following is what constitutes being a first-time homebuyer:
- If you’ve never owned a home and the property you are purchasing will be your primary residence you can qualify to be a first-time homebuyer.
- If you haven’t owned a primary residence/home in a three-year period you can qualify as a first-time homebuyer. This criteria also applies to a spouse if only one of you meet this threshold, you’d be considered a first time homebuyer.
- If you’re a single parent or a homemaker and only owned a house with your spouse while you were married;
- If your primary residence was, for example, a mobile home that wasn’t attached to a foundation; or
- If you owned a home that wasn’t in compliance with state or local building codes and that in order to bring it into compliance would cost more than constructing a new residence… all qualify for the first-time homebuyer program.
https://archives.hud.gov/offices/hsg/sfh/ref/sfhp3-02.cfm
Loan Programs
Banks, credit unions and mortgage companies are considered commercial lenders. Organizations like FHA, VA, USDA, and Freddie Mac don’t actually make the loan but they will guarantee the loan if you qualify. Having these organizations guarantee the loan protects the lender from borrowers defaulting and creates less of a risk for the lender, and makes loans more affordable for the borrower.
Federal Housing Administration (FHA):
Getting a loan with a commercial lender that is backed by the FHA is helpful to first-time homebuyers with little cash savings and lower credit scores. Private lenders are an option and can offer good rates if you have a larger down payment and good credit. Note that the FHA has lending limits it will insure that are updated annually. (2020 FHA Lending Limits, link below)
https://www.fha.com/lending_limits
Having the FHA guarantee a loan made by a commercial lender makes it easier for you to qualify. In order to meet FHA borrower guidelines you’ll need to have a minimum FICO score of 500. If you have a FICO credit score between 500 and 579 you’ll need a 10% down payment. If your FICO credit score is 580 or greater you can put down as little as 3.5%. No matter your credit score you’ll be required to have MIP (Mortgage Insurance Premium). Additionally, your debt to income ratio must be less than 43% and you’ll need to show steady income, proof of employment and the home you are purchasing must be your primary residence. (Credit Requirements for FHA Loans, link below)
https://www.fha.com/fha_credit_requirements
You can get an FHA Home loan for a multi-family property if you are going to live in one of the units for at least one year and it must be occupied by the FHA borrower usually within 60 days after closing. You can also purchase a condo, new construction or a manufactured home from some participating FHA lenders. Often with an investment property, you’ll need 20% down but with an FHA loan the down payment for a single family versus a multifamily are the same, which means you may not need 20% down but lender standards may vary so do your homework on your lenders before committing.
Veteran’s Administration (VA):
If you are an active duty member, a veteran or eligible surviving spouse the VA will guarantee portions of home loans provided by lenders. A VA-backed loan often offers no down payment as long as the sales price isn’t higher than the appraised value and you’ll get better terms and interest rate than other loans.
You can borrow more than the amount if you want to make a down payment (see link below about VA loan limits), you won’t need private mortgage insurance (PMI) or mortgage insurance premiums (MIP), you’ll have fewer closing costs and no penalty if you pay the loan off early. You might need to pay a one-time VA funding fee and you’ll have to qualify for a Certificate Of Eligibility (COE). You can buy a single family home, up to 4 units, a VA approved condo, a home to improve, a manufactured home, or you can build a new home with a VA backed loan. (US Department of Veteran Affairs, VA Home Loans)
https://www.benefits.va.gov/HOMELOANS/
https://www.va.gov/housing-assistance/home-loans/loan-types/purchase-loan/
https://www.va.gov/housing-assistance/home-loans/loan-limits/
USDA (United States Department of Agriculture):
USDA loans are meant for rural area home ownership and for both first-time and repeat homebuyers. USDA requires no down payment, low mortgage rates and requires an annual fee instead of mortgage insurance and can be less expensive than an FHA or conventional loan. They guarantee 90% of the mortgage loans amount for approved lenders to help offset the risk of offering 100% to eligible rural homebuyers.
With a USDA loan you pay an upfront 1.00% down on your loan amount but it’s wrap into you loan so you don’t have to pay out of pocket, but you can pay the 1% upfront if you choose to do so. In addition to this upfront fee there’s a one-twelfth of 0.35% of the existing loan balance. The overall cost of the USDA loan is generally less than FHA or conventional loans and there are no credit score limits but you must be able to show you can handle and manage the debt. The interest rates vary depending on the lender.
If one lender doesn’t offer a USDA loan seek out another lender that does before deciding which type of loan will best suit your needs. Try a rural area bank that is familiar with USDA loans before making a decision to go with a FHA loan.
The USDA loan is meant to help people in rural areas and the area’s population determines if it’s a rural area. Some suburban areas are eligible even if they lie outside major cities and aren’t technically a rural area. Outside of VA loans the USDA mortgage is most widely available with zero-down. The property’s most important criteria to qualify is the location of the property.
For Property Eligibility go to the link below where you’ll have to accept the disclaimer for property eligibility, once you accept it will take you to a page where you can input the address for USDA loan eligibility.
https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp
The funds can be used for a new or existing property that will be you permanent residence and no acreage limits. The structures can be attached, detached, condo, planned unit development, modular, or manufactured but cannot be an income producing property.
Freddie Mac has a Guaranteed Rural Housing Service under its Section 502 Guaranteed Rural Housing Loan Program specifically for rural areas. It’s good for people who need closing costs to be included in loan amount and no-cash-out refinancing.
Other Financial Assistance Programs
Freddie Mac Home Po Possible® Mortgage:
Freddie Mac “Home Possible®” Mortgage (The Federal Home Loan Mortgage Corporation) makes it so that lenders can offer loans with as little as 3% down payment with this program. 1-4 units, condos, planned-unit developments and manufactured homes are eligible with certain restrictions.
This program isn’t limited to first time borrowers and is for low to moderate-income borrowers, move-up borrowers and retirees. With this program your income cannot exceed 80% of the area’s median income (AMI) and if there is a co-owner/borrower, only one of you need to make it your primary residence and the borrower may have ownership interest in one additional financed residential property.
https://sf.freddiemac.com/working-with-us/origination-underwriting/mortgage-products/home-possible
Freddie Mac’s “Home Possible Income and Property and Eligibility Tool” can provide you with access to information about down payment assistance programs. To verify if you qualify based on the property’s location and your income see link below.
https://sf.freddiemac.com/working-with-us/affordable-lending/home-possible-eligibility-map
Other Freddie Mac Products:
- Home One – available to first-time homebuyers with a low 3% down payment option.
https://sf.freddiemac.com/working-with-us/origination-underwriting/mortgage-products/home-one
- CHOICERenovation Mortgages – allows lenders to let borrowers use money for renovations.
- CHOICEHOME Mortgages – offers site-built financing for manufactured homes that meet certain specifications.
- GreenCHOICE Mortgages – helps to finance energy efficient homes and improvements, financing up to 30 years.
- Super Conforming Mortgages – are for loans with higher maximum loan limits that are permitted in high-cost areas.
- Manufactured Home Mortgages – for low and moderate-income borrowers who want conventional finance terms for manufactured homes.
- HUD-Guaranteed Section 184 native American Mortgages – for Native American, Alaskan American, New Mexican Pueblo homebuyer borrowers who need to finance closing costs with flexible down payment options, closings costs and prepaid with no reserve requirements.
- HFA Advantage – is a conventional mortgage product available to only to housing finance agencies (HFA). You must qualify for HFA homeownership programs. HFA provide housing for people with physical disabilities, mental illness, substance abuse addictions, homeless families, elderly.
https://sf.freddiemac.com/working-with-us/origination-underwriting/mortgage-products/hfa-advantage
Fannie Mae’s Home Path Ready Buyer Program:
Fannie Mae’s Home Path Ready Buyer Program created in 2015 that if you qualify you could receive up to 3% of your purchase price in closing costs. In order to be eligible you have to take a homebuyers course ($75 – reimbursed the training cost at closing) that consist of nine, 30 minute session all online that covers complexities of buying and the responsibilities of owning a home and receive a certificate of completion before and offer can be made. Auction, pool and investor sales aren’t eligible and your request for closing cost assistance must be made at initial offer.
Connecticut Housing Finance Authority (CHFA):
https://www.chfa.org/homebuyers/all-homebuyer-mortgage-programs/
In order to be eligible for CHFA mortgage you must be either a first-time homebuyer or if you haven’t owned a home in the past three years. Additionally, you’ll be required to take a Homebuyer Education class.
You can also apply for a CHFA mortgage if the property you are looking to purchase is in a federally targeted areas of the state (CHFA Resource Map) where there are income and sale price limits and you don’t own other property at the time of the loan closing. If you purchase a home in a targeted area you can get 0.25% discount on CHFA interest rates and first-time homebuyer and income limits are waived unless you are using the downpayment assistance program.
https://www.chfa.org/homebuyers/chfa-resource-map-target-areas/
Homebuyer Mortgage Programs on the Connecticut Housing Finance Authority website include the following. You can find a link to all these programs by going to…
https://www.chfa.org/homebuyers/chfa-first-time-homebuyer-guide/
- HFA Advantage and HFA Preferred Programs,
- Downpayment Assistance Program (Dap),
- FHA 203(k) Renovation Program,
- Veterans & Military Service Members,
- Teacher Mortgage Assistance Program,
- Police Homeownership Program,
- Disabled Person Homeownership Program,
- Homeownership for Residents of Public Housing Program,
- Mobile/Manufactured Homes,
- Conventional AMI Loan Program.
CHFA Approved Lenders:
If you are looking for a CHFA approved lender who can approve and close loans before submitting file to CHFA for review go to:
https://www.chfa.org/realestateagents/chfa-approved-lenders/
State and Local Government Programs:
In addition to financial assistance programs that come from state and federal government where these programs can help with money for down payments, closing costs, or other expenses related to the buying be sure to check with your city and county government offices for homebuyer programs.
Individual states sponsor homebuyer programs for first time homebuyers. Go to the link below for Connecticut and other state’s housing website programs.
https://www.hsh.com/finance/mortgage/home-buyer-programs.html
