As a first-time home buyer, you might be overwhelmed by all of the terminology and phrases you hear like a mortgage calculator. You might wonder whether you can even buy a house and whether all of what you’re thinking is just a pipe dream. Luckily, first time home buyer programs exist so you can receive assistance throughout the home buying experience, no matter what your financial background is.

Programs such as charitable and government-sponsored companies can offer benefits such as down payment assistance, tax credits, and educational programs that help first-time home buyers find the home loan that fits their financial needs best.

Down Payment Assistance

Down payments are the largest initial expense you have to consider when going through the home buying process. These are required for most mortgages unless you have a VA loan. You need to be a veteran or active service member to qualify for a VA loan.

Though you need a down payment for nearly all home loans, contrary to what many believe, you don’t need a 20% down payment to receive your mortgage. Many lenders can issue loans with as little as 3% down on their first home.

DPA Loans

If you’re not sure that you can cover the entire down payment requirement on your own, you might be able to get down payment assistance through specific types of loans that can reduce the amount you have to put down toward your home. A few options include second mortgages, deferred payment loans, and forgiven loans. Loans structured as second mortgages must be paid off simultaneously with your main mortgage. Deferred payment loans must be paid in full when you move, sell refinance, or pay off your main mortgage. Loans can also be forgiven over a set number of years, but you will need to repay them when you sell, refinance, or pay off your main mortgage if you move before the set time.

DPA Grants

DPA grants are the most favorable options for first-time home buyers. The program requirements for these grants can vary greatly, so it’s best to check with your local or state government for details on any of the first-time buyer programs.

Government-Backed Loans

Loans backed by the government can also aid first-time home buyers in their purchase so they don’t have to worry about down payments. These types of loans are covered in more detail below.

Tax Deductions

While you can no longer take advantage of the Housing and Economic Recovery Act’s $7,500 credit for first-time home buyers. This program ended in 2010, but you can still save money on your taxes with various deductions. Federal and state deductions can also lower your taxable income.

An example of this can be seen in the fact that you can deduct the full amount of your mortgage insurance costs for a primary residence and one vacation home if your mortgage is worth less than $750,000. This particular deduction has been extended through the 2021 tax year, and you should make sure it still applies. It includes private mortgage insurance (PMI) and mortgage insurance premiums (MIP) associated with FHA loans as well as guarantee fees for USDA loans and the funding fee for VA loans.

You can deduct the cost of interest paid during the year on loan amounts up to the above limits for primary and secondary homes. Additional deductions can be found by checking with your local or state government.

Closing Assistance

Similar to down payment assistance, closing assistance gives businesses the chance to take advantage of both government and private assistance. Closing costs are additional fees you typically pay at the end of the mortgage process. They can account for 3-6% of the total cost of your home loan and like down payment assistance, closing costs assistance can show up as a grant or loan.

An additional option is to ask your seller for help with closing costs and seller concessions. The seller can help with attorney fees, real estate tax services, and life insurance. They can also help pay for points to lower your interest rate and contribute to property taxes.

Home Buyer Education

As a first-time home buyer, you can take advantage of online educational programs and resources if you aren’t sure how to start your home search. Most first-time home buying programs are free or low-priced and they can teach you about loan options, the home buying process, and how to apply for a mortgage. You can also browse real estate courses online and examine which ones are geared specifically toward first-time home buyers.

Federal First-Time Home Buyer Programs

You can take advantage of federal, state, and local government programs when you buy a home. Federal programs are open to any citizen or legal resident in the US. WHile not everyone qualifies for all the programs, you don’t need to live in a specific location to receive federal assistance.

Government-Backed Loans

Government-backed loans allow you to buy a home with a low down payment and bad credit. The government insures these loans which means they pose less risk to lenders. Each program has its own list of qualifications.

Good Neighbor Next Door

If you are a pre-K-grade 12 teacher, emergency medical technician, firefighter, or law enforcement officer, you can take advantage of the Good Neighbor Next Door program. This program is sponsored by the Department of Housing and Urban Development and it offers a 50% off discount on HUD properties. Properties available include foreclosures and other fixer-uppers. You can also view a list of available properties on the HUD website.

Conclusion- First-Time Home Buyer Resources

If you’re a first-time home buyer, you shouldn’t feel overwhelmed by all of the confusing terms and conditions that get thrown at you during the home buying experience. There are plenty of resources at your disposal so you can take advantage of all the programs and relief available. Government and private programs can help ensure that you have confidence in your decision so that when it comes to buying your house, you know exactly what to look for.

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