First-Time Homebuyer Programs

The U.S. Department of Housing and Urban Development (HUD) provides billions of dollars every year to housing grants, turning the homeownership dream into reality.  If you are buying a home for the first time, you file for a buyer grant.  There are national, state and local programs and grants available to first-time homebuyers.  These programs and subsidies can help cover portions of acquisition costs, including the down payment, and allow buyers to get a higher percentage of loans to finance.

Grants for First-Time Homebuyers

Grants can be just as important as loans when buying your first house.  First-time grants for homebuyers can be a significant source of funding, and unlike a loan or a debt, a grant will not have to be repaid.  Often these programs are focused on areas where the government wants to encourage the revitalization of a community.  This makes "urban homesteading" a viable and less expensive option for the first-time buyer.  These grants are a boon for both home buyers and the community.

Given the lower requirements for down payment, FHA loans are a natural choice among the many down payment assistance programs that are available to help you on your way to buying a home, though they do have their own strengths and weaknesses.  Most federal grants cater to the first-time homebuyer, and they are intended to help those individuals get started towards homeownership, but these grants should not be expected to cover a large percentage of the new home's cost.  Most can be expected to only help pay for certain expenses such as closing costs.

For example, down payment with an FHA loan is 3.5% of the cost of the home.  Current FHA loan guidelines allow for the down payment portion of your home to come from several different places: a gift, personal savings, tax returns, and down payment assistance programs.  Down payment assistance programs are funded at the city, county, and state levels, and due to this funding, the assistance programs are ever changing.  Each program operates with its own set of requirements.  Credit score, income levels, and other factors will influence your eligibility for down payment assistance programs.

Since homebuyer grants are meant to be used towards the purchase of a new home, there are qualifying rules for these funds.  Generally, grants will not be given to anyone that cannot qualify for a mortgage.

Finally, all federal grant programs aimed at first-time homebuyers will require the individual to attend HUD-approved house counseling class.  These classes help to prepare individuals for homeownership by assisting them in the process of getting their finances in order.  By doing so, these individuals stand a greater chance of qualifying for a mortgage.  for example, simple courses in home economics or household budgeting are important to the financial success of the individual and achieving the grant program's goals.

There are steps to follow when applying for a buyer grant.  First, find a homebuyer grant the fits you.  Then, check the requirements of that grant program.  Finally, find an approved lender and fill out all the application forms correctly.  To look for specific down payment programs visit https://www.workforce-resource.com/dpr/pmt/MFRMLS/JIM_SHORKEY

HUD's definition of a first-time home buyer is someone who meets any of the following conditions:

• An individual who has not owned a principal residence during the three-year period ending on the date of purchase of the property.  A person's spouse is also a first-time homebuyer if either person meets the above criteria.
• A single parent who has only owned a home with a former spouse while married.
• A displaced homemaker who has only owned with a spouse.
• An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations.
• An individual who has only owned a property that was not in compliance with state, local or model building codes and which cannot be brought into compliance for less than the cost of constructing a permanent structure.

Penalty-Free IRA Withdrawal for First-Timers

First-time homebuyers are eligible to take $10,000 during their lifetime out of their Individual Retirement Accounts without paying the 10% penalty for early withdrawal.  If yours is a traditional IRA, you will have to pay income tax on the money withdrawn.  Roth IRA accounts are not subject to additional taxes as they are funded with money that has been taxed.  Since the $10,000 lifetime amount earmarked for penalty-free withdrawal is for each individual, a couple could collectively withdraw $20,000 to pay for their first home.  The money must be used within 120 days, though, or it becomes subject to the normal 10% penalty.