First Time Home Buyer Programs for Low to Middle Income Families

First time home buyers are in a interested spot.  With the housing inventory at a all time low, there is not a lot of options.  We simply have more buyers than sellers.    Many of these first time home buyers are also facing rising home prices due to this shortage with their wages not being enough to even qualify for a mortgage.   Can anyone really blame a person for just renting a little longer?   

However, the reasons for owning a home still stands.   You get full control of a home when you own it versus renting requires help from the landlord to fix broken item.   When you own, you can make cosmetic changes to the property more easily.   First time home buyers are setting themselves up to build up some wealth over their lives by investing in their homes versus throwing rent towards nothing but the short term need for housing.  Finally, many rentals cost more than what you would pay in a mortgage payment every month.  The trick for many low to middle income families is how to qualify for the mortgage when you can’t save money or you seem to make less than what is required to get a mortgage.  

There is some help available.   I have done some research in the matter and you can find some great programs below to help first time home buyers with their home purchase by allowing them to get a mortgage or financial help.   Once you get done reading over these great programs, be sure to check out our frequent questions when purchasing a home to help you get through the rest of the process.  You can also contact me directly with any questions.   

Please note that if you are not in a financial position to buy a house that it does not matter what programs are available, you should NOT do it.  There are some mortgage companies offering non-prime mortgages for nontraditional buyers.  These programs used to be called subprime mortgages.  I am sure you remember what happen to our economy when these were being handed out like candy.   It is always better to wait versus buy something you cannot sustain.  Mortgages will cost you more than any other item in your life.   Don’t rush into it!   

Here are some programs for you to consider for first time home buyers. 

FHA loans –  These loans are backed by the federal government.  These loans are really good for low to middle income families due to the low down payment required (3.5%) and you can have a lower credit score (580).  These loans can be more expensive in the long run, because you have to pay a monthly mortgage insurance premium, which is used by lenders if you should default on your loan.   However, if you are financially sound otherwise, but just can’t qualify for a conventional mortgage, this one is a good one that should always be considered by first time home buyers.   You should visit with any lender about their FHA programs.  Almost all lenders offer FHA loans. 

3% down Freddie Mac Programs – The Home Possible Advantage program requires even less of a down payment(3%).   You have to plan to live in the home and can only refinance later if you don’t cash out of the refinancing.   They also allow you to get the 3% in several different ways including gifts from family and down payment assistance grants (look here for more on those grant programs).  This program also works with a wide variety of lenders. Just ask about their 3% down programs.   

USDA and VA loans – We have reviewed a 3.5% down program and one 3% down programs.  How about zero down?   The USDA program and VA program helps certain individuals with their home purchasing by financing the entire purchase for the first time home buyer.  With USDA programs, the property itself is the important part (although there are limitations based on income level).   USDA works with home buyers who are looking to purchase in rural areas.   Does this mean you can’t live in a metro area?  No.  You would be surprised by what USDA considers rural.  You should ask your lender if your target property qualifies for USDA.   With VA loans, it should come of no surprise that veterans benefit from this program.  If you have ever served, I highly encourage to take a look at it.  You can buy a house with nothing down and I have helped veterans buy some nice expensive properties through the program.   You should be conscious of both these programs when it comes to your mortgage’s monthly payment.  With no money down initially, it will usually mean a higher monthly payment.   Be sure to ask your lender!  

Buy a fixer upper – If you have a handyman bug in you, you might want to consider a rehab loan from the FHA called the 203k loan.  I love these loans because you can take a home that is not move in ready and roll the rehab costs into the mortgage itself.  It does take longer to get these loans to be approved and you have to work with the government inspectors to make sure the rehab work is done according to specs, but these minor inconveniences can be overlooked for the fact that you can get a nice home after all the work is done.   Down payment is still 3.5% but you would be surprised how many lenders will be willing to work with you on the down payment for the 203K loans.  Just ask!   

Good Neighbor program – If you are a teacher, peace officer, fireman or EMT, you can qualify for this program which can give you a 50% discount on a home located in a revitalization area, which are areas that tend to have low income, low home ownership rates and noticeable foreclosure rates.   If you are curious about what these houses look like, the Housing and Urban Development Department has a listing available homes here.  Take a look!    You do have to still qualify for a mortgage but you can use any of the other programs I have listed in this post.   

Finally, be sure to check your local and state governments for programs that could help you as well.   Good luck and if you need help, be sure to contact me.