Three First Time Home Buyer Programs That Will Impress Your Friends

Lately, I have been approached quite a bit from first time home buyers looking to get their first house.   This is good news because since the break down of the industry back in 2007, many more people are renting than buying.   It is refreshing to work with these first timers since they bring such excitement and eagerness to the process.   With experience home buyers, you don’t see the sparkle in their eyes like you do with first timers when the whole world of opportunity is still in front of them.   I have been writing a series of posts over the last year on buying your first home.   These informative articles guide first time home buyers through each step of the home buying process.  

One aspect I had not yet touched on is what happens if you want to be a home owner, but haven’t quite reached the income level or savings to move forward with purchasing your first property.  I have to advise any one thinking about being a home owner to not jump into it if you are facing difficult financial challenges already.   It is a bad idea to commit yourself to the extra expenses for the long term if you are already having some issues with making ends meet every month.  However, if you are not praying every time you get a paycheck that it will last until your get paid again, then you are most likely in good position to pursue home ownership. 

It could be that you simply do not have enough coming in to save for a down payment and closing costs.  Luckily, if this is all that is keeping you from moving on buying your first home, there are some first time home buyer programs available to help you with these costs.   Here are three first time home buyer programs that you can impress your friends.  

5 STAR Texas Advantage Program(SETH)  – This program provides down payment assistance to home buyers and it not reserved for first time home buyers only.    The great thing about this program is that it is a grant and not a loan so you do not have to pay back the funds.    The funds can be used for either the down payment itself or the closing costs that come along with buying a home.  Buyers have to meet a certain income level requirements, which is based on location,  in order to participate.  The grant amount is based on the final sales price of the property.   The maximum amount of the assistance is 6% of the sales price of the home.   If you do participate in the program, you will be required to attend a class on home ownership.    You do have to go through a traditional lender to participate in the program,  find a list of participating lenders here.    This program is available throughout Texas except the city limits of El Paso, Grand Prairie, McKinney, and Travis County.

Texas Department of Housing and Community Affair Programs.  This is a state agency that has been helping homeowners for more than 32 years.    There are actually two noteworthy programs stemming from this state agency.   My First Texas Home (TMP 79) is a program to help first time home buyers with better choices in mortgage rates than what they might find on the open market.   It also provides up to 5% of the mortgage loan to be used towards down payments and closing costs.    There are some eligibility rules to follow including a minimum income and maximum purchase price.  These numbers are determined by where you live.   They give you some great step-by-step instructions on how to participate in the program.  After determining if your credit allows you to participate, you will then need to look over what type of properties you can qualify to purchase.   You will then need to gather all the important documents. The last step is find a lender and a realtor.       Texas Mortgage Credit Certificate Program gives out certificates to participates that can be used for a dollar for dollar on your federal tax liability.   Forty percent of the real estate interest you pay annually can be claimed on your taxes.   For example, on a $130,000 home with a 5% interest,  you would pay around $6,800 in interest during the first year.   Forty percent of that is $2,600 so you would be able to take the full $2000 max allowed deduction on your tax return after buying your home.     This program lasts the length of the loan too so it is a great program to consider when looking to buy your first home. 

City Programs for First Time Home Buyers – There are many cities throughout the state that also offer programs for first time home buyers.  These programs work similar to the two other programs we have already discussed by helping with a down payment and closing costs with a preferred lender.    I highly recommend checking with your city to see if they have a program in place for you.  Sometimes they will be on the county level.  As an example, let’s look at the Grand Prairie.  This city’s program is administrated by the Grand Prairie Neighorhood Texas Housing and Neighborhood Services.  Here is a breakdown of their program as found here

  • Provides a total up to $5,000.00 contingent upon available grant funding and eligibility for “up to 50 percent of required down payment for low or moderate income homebuyer; or pay reasonable closing costs (normally associated with the purchase of a home) incurred by a low or moderate income homebuyer.”
  • Buyer must have a minimum investment of $500.00.  This must be reflected on the HUD-1 form.
  • Households who receive assistance will not be required to make monthly payments on the grant.
  • If the total exceeds the $5,000.00 limit, the buyer will be responsible for the additional funds. The City will not pay any fees, cost, or reimburse charges directly to the client. The City has sole discretion as to where the funds can be used, up to but not to exceed $5,000.00.
  • Property must be located within the city limits of Grand Prairie.
  • Property must be the primary residence of the buyer.
  • Property sales price may not exceed $200,000.00; this is 80% of the 203(B) limits ($250,000.00) for the Grand Prairie area.
  • Custom-built, new construction property is ineligible unless constructed under an approved affordable housing program. The property must be from existing housing stock located in Grand Prairie.
  • Properties built before 1978 must have a lead based paint visual assessment. If deteriorating lead based paint is found, it must be stabilized. The property must be “lead safe” before occupied by the buyer.
  • No other federally funded sources may be used in conjunction with the program.
  • Property must pass HQS inspection performed by the City of Grand Prairie and all utilities must be on.

As with the other programs, the amount of down payment assistance depends on the income of the applicant.  All applicants have to be a first time home buyer.   

As you can see, if you are a first time homebuyer having some issues meeting down payment and closing costs for a home, you do have some options to try with first time home buyer programs.  You can work with a specific nonprofit program or try a state or local program helping first time home buyers.   You can also ask your preferred lender as sometimes banks will offer program outside of these government based ones.