How To Apply For First-Time Homebuyer Grants

First Time Home Buyer

Explore Your First Time HomeBuyer Grants Now!

Have you ever stood in line for a rollercoaster that has a reputation for being extremely exhilarating? That feeling of dread, excitement, and anticipation just about sums up the experience of buying your first house. Maybe A First Time Home Buyers Grant can help.

You know that it is the right time to buy, but you are about to take on a mortgage and all the responsibilities of a house and you are not sure what to do.

Keep reading this guide to find out how to apply for a first-time homebuyer grant. A first-time grant can provide you with the assistance that you need for buying your first home.

Who is a First-Time Homebuyer?

In 2020, 14% more Americans became first-time homebuyers compared to the previous year. The experts expect this trend to continue throughout 2021.

A first-time homebuyer as defined by the United States Department of Housing and Urban Development, HUD, is someone who:

  • Has never owned a primary home in the last 3 years
  • Owned while married to a former spouse but is now a single parent
  • Is now a displaced homemaker who previously owned with a spouse
  • Only owned a primary residence not permanently attached to a permanent foundation as per applicable regulations
  • Only owned a primary residence that is not in compliance with codes and cannot be made compliant for less than the cost of building a permanent structure

What Are The Costs Associated With Purchasing A Home?

Many times, prospective homebuyers do not realize that there are several costs besides the purchase price of the home that they need to consider.

These costs include coming up with the down payment, closing costs, homeowners insurance, and mortgage insurance. All of these costs associated with homeownership are outlined below.

The Down Payment

The down payment on a mortgage is the initial payment made to buy the property. It is a percentage of the price. The down payment requirement stipulated by the lender varies and can range from zero up to 20%.

For example, if you were trying to purchase a house for $300,00, a 5% down payment on the purchase price of the house would be $15,000. A 20% down payment on the same property would be $60,000.

Many first-time homebuyers may not have a substantial amount of money saved for this down payment.

Standard mortgage loans not only have stringent credit requirements but also ask for a 20% down payment at closing.

There are several programs available to the first-time homebuyer. These programs can provide down payment assistance, as well as help with closing costs.

Assistance can be in the form of grants, deferred payment loans, as well as zero-interest loans.

Government programs such as those provided by the FHA, VA, and USDA allow you to secure mortgage loans with no down payment.

While the FHA does not provide a down payment assistance loan, you will only need to have 3.5% as a down payment to secure an FHA loan, if your FICO credit score is at least 580.  If your FICO score is below 380, then you will need to put down 10%

Closing Costs

The closing costs are all the fees associated with a mortgage. Before the closing of a real estate transaction, both the buyer and the seller have to be aware of all the closing costs.

Closing costs are usually between 2% to 5% of the total loan amount. Using the $300,000 house price from the above example, you can expect closing costs to be between $6,000 and $15,000.

The fees and charges in the closing costs can include:

  • An origination fee that the lender charges the borrower for the mortgage loan
  • A loan application fee which is a non-refundable fee associated with the submission for the loan
  • An appraisal fee is paid to the appraiser who goes out to assess the value of the property you are looking to buy
  • Credit report check performed by the lender to find out your credit history and score
  • Title insurance is a form of insurance that protects both the homebuyer and the lender from defects in the title of the property
  • The title search fee is the cost of researching the title to see if there are any defects

Some mortgage lenders will allow you to roll your closing costs into the principal amount of your mortgage. Doing this does increase your mortgage amount, but it enables you to come to closing with less cash out of your pocket.

Homeowners Insurance

Homeowner’s insurance covers your house and your belongings in case of a destructive event.

The insurance covers any damages to your property. It also covers your liability in case you or your family members or pets cause injury to others or damage to their property.

According to recent statistics, about 85% of homeowners in America have homeowners insurance. The average annual premium for homeowners in 2021 is about $1312, or about $109 per month.

Mortgage Insurance

Mortgage insurance protects the mortgage lender or investor from losses caused by borrowers defaulting on a mortgage loan. The mortgage insurance policy lowers the risk to the lender.

Borrowers who put down less than 20% down payment are typically required to pay mortgage insurance. You do not have to pay this in cash at closing as the amount is added to your mortgage and paid through your monthly payments.

Which Grants and Loans Are Available To Cover First-Time Homebuyer Costs?

As you can see, there are many costs incurred in buying a home. There are, however, grants and loans available to the first-time homeowner which can make owning a home a reality.

A grant is different from a loan in that a grant does not have to be repaid, while a loan will eventually need to be repaid.

Some grants come from non-profit organizations or government agencies and usually take the form of Down payment Assistance or DPA.

DPA programs are tremendously helpful if you, like many other home buyers have not been able to save the 20% needed to get the best mortgage rates. DPA’s are usually for first-time homebuyers, low-income families, or others who are disadvantaged.

An example of a nonprofit organization that gives grants is the  National Homebuyers Fund, NHF.

The National Homebuyers Fund is a nonprofit, public benefit corporation that can offer up to 5% of the principal amount on a mortgage loan.

On a $200,000 house, the NHF would provide $10,000 which can be applied towards the down payment.  The money from the NHF is a grant which does not need to be repaid.

Grants and loans may also come from government-backed agencies such as the Home path Ready Buyer program. This program is administered by the Federal National Mortgage Association, Fannie Mae.

Under the Home path Ready Buyer program, first-time homebuyers are eligible to get up to 3% towards their closing costs after they have completed an online educational course.  The only stipulation is that the home is a foreclosure owned by Fannie Mae.

Additional assistance for the first-time homebuyer comes in the form of Forgivable Loans which are issued at 0% interest. They are really second mortgages that do not have to be repaid if you stay in the home for a certain number of years.

Deferred Payment Loans also come with 0% interest and are second mortgages that have to be repaid if you move, sell, or refinance your first mortgage or pay down your first loan.

Other assistance with down payments and other costs can come from Interest-free loans.

Requirements to Receive Down payment Assistance Grants or Loans

There are over 2,000 DPA programs offered across the United States, and each state has its own set of rules for qualifying, but there are some standard requirements for most programs.

  1. The number of grants is limited so potential recipients may have to wait to receive funding
  2. You will have to complete several hours of housing counseling
  3. The grants have to be used for your primary residence and not for a vacation home or investment property
  4. Several down payment assistance programs have credit minimums as well as maximum income limits.

How Do You Get A First-Time Homebuyer Grant?

Buying your first home is an attainable goal. There are costs associated with the purchase beyond the principal amount of your mortgage loan, but as you have seen, there are grants out there which you can get.

These grants can help to cover your down payment, and sometimes even help as well with your closing costs.  To receive these grants as a first-time homebuyer, you must work with an approved mortgage lender.

As you look to buy your first home, the mortgage lenders at RealFi would love to work with you to navigate the process of getting a grant that will make purchasing your home possible and even more affordable.

Please call 800-601-1917 or simply click here –

Here are some relevant and helpful articles – Buy a House? When Should You Take Out a Mortgage    Mortgage Rates Are Low, but How Long Can It Last?   How Soon After Purchasing My Home Can I Refinance?    How Can I Eliminate My Mortgage Faster?   RealFi Offers a Diverse Range of Residential-Non-QM-Mortgages   First Time Home Buyers

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