7 First-Time Home Buyer Programs

Buying a home is so hard, they should make it an Olympic event. It’s not just the paperwork; it’s the terminology, the fees and the number of people involved. It’s natural to want to agree to whatever, sign everything and just get through the process as fast as you can. But while that may make you a medalist in downhill skiing, it won’t earn you many style points in life’s uphill battle to financial well-being.

Here are some of the most useful first-time home buyer programs that you might overlook if you rush the process. They may score you some big savings.

FHA

This is the go-to program for many Americans, especially first-time home buyers and those who have a credit history that’s … let’s say shaky. The Federal Housing Administration guarantees a portion of home loans, which frees lenders to broaden their acceptance standards. With FHA backing, borrowers can qualify for loans with as little as 3.5% down.

FHA loans do have an up-front and ongoing additional cost built in: mortgage insurance premiums. This protects the lender’s stake in the loan if you default.

USDA

This one may surprise you. The U.S Department of Agriculture has a home buyers assistance program. And no, you don’t have to live on a farm. The program targets rural areas and allows 100% financing by offering lenders mortgage guarantees. There income limitations, which vary by region.

Good Neighbor Next Door

This initiative was originally called the Teacher Next Door Program but was expanded to include law enforcement, firefighters and emergency medical technicians, hence the snappy “Good Neighbor” name. A HUD-sponsored program, it allows 50% discounts on the list price of homes located in revitalization areas. Yes, half off. Who knew? You just have to commit to living in the property for at least 36 months. These homes are listed — for just seven days — on the Good Neighbor Next Door sales website.

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Home upgrade programs

Here are a couple of programs that allow you to buy more home for your money.

• The Energy Efficient Mortgage Program extends your borrowing power when you buy a home with energy-saving improvements or upgrade a home’s green features. If you qualify for a home loan, you can add the EEM benefit to your regular mortgage. It doesn’t require a new appraisal or affect the amount of your down payment. The program simply allows your lender the flexibility to extend loan limits for energy efficiency improvements.
• There are also HUD 203(k) loans, designed for buyers who want to tackle a fixer-upper. This special FHA-backed loan considers what the value of the property will be after improvements and allows you to borrow the funds to complete the project as part of your main mortgage.

“These loan programs are designed for buyers who want to tackle a fixer-upper.”

VA

The U.S. Department of Veterans Affairs helps service members, veterans and surviving spouses buy homes. VA loans are especially generous, often requiring no down payment or mortgage insurance. But like a lot of military operations, the approval track is built for accuracy, not speed.

While the VA has only a few requirements for things like debt and sufficient income, VA lenders may add their own “overlays,” or additional requirements.

Dollar Homes

This sounds like one of those late-night television offers, but HUD claims to offer $1 homes that have been acquired by the FHA through foreclosures. Needless to say, this is a tiny pool of houses. At last check, only a handful of listings appeared on the website. Curiously, one home we checked out in the Dollar Home category seemed to be listed for $17,900. We’re not sure what that’s about, but shop carefully.

Fannie and Freddie

They sound like classic ’70s rock bands, but Fannie Mae and Freddie Mac are the engines behind the home loan machine. These government-sanctioned companies work with local lenders to offer some appealing options on conventional loans, such as 3% down payments.

Even more help

In addition to these national programs, many state and local governments offer assistance to home buyers. Browse our list of california state first-time home buyer programs to learn more.

Tapping one of these resources may help you buy a home with less of a down payment, lower your interest rate, or even find a bargain in your neighborhood. Then you can have your own opening ceremony in your new home.

Please call me, I will be happy to help on getting pre-qualified for a home, Call or Text (760)391-1741 or send an email: nadia@usdesertrealty.com

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California 2019 First-Time Home Buyer Programs

The homebuying process can be daunting, not to mention expensive. That’s why the California Housing Finance Agency, or CalHFA, offers several loan programs to help qualified first-time home buyers get a mortgage.

You may also benefit from a national loan program that features low credit score or down payment requirements. Explore all the options for buying your first home in the Golden State.

National first-time home buyer programs

Offered by most lenders, these national loan programs are always worth consideration, especially if you need flexible credit requirements or low down payment options.

Conventional mortgage

National program

• Low down payments

• Limited mortgage insurance premiums

WHAT YOU NEED TO KNOW

A conventional mortgage is a home loan that isn’t guaranteed or insured by the federal government. Conventional mortgages that conform to the requirements set forth by Fannie Mae and Freddie Mac allow down payments as low as 3% for first-time buyers or lower-income home buyers. Unlike FHA loans, conventional loans allow borrowers to eventually cancel their mortgage insurance or avoid mortgage insurance altogether if they put at least 20% down.

VA loans

National program

BEST FOR:

• Military

• Low down payment

WHAT YOU NEED TO KNOW

The U.S. Department of Veterans Affairs helps service members, veterans and surviving spouses buy homes. VA loans are especially generous, providing competitive interest rates, often requiring no down payment or mortgage insurance. Although there is no official minimum credit score, most VA-approved lenders require scores of at least 640.

FHA loans

National program

BEST FOR:

• Low credit score

• Low down payment

WHAT YOU NEED TO KNOW

This is the go-to program for many first-time home buyers with lower credit scores. The Federal Housing Administration allows down payments as low as 3.5% for those with credit scores of 580 or higher. The FHA will insure loans for borrowers with scores as low as 500 but requires a 10% down payment for a score that low. Mortgage insurance is required for the life of an FHA loan and cannot be canceled.

USDA loans

National program

BEST FOR:

• Low down payment

• Rural

WHAT YOU NEED TO KNOW

A USDA home loan is a zero-down-payment mortgage for eligible rural and suburban home buyers. USDA loans are issued by the U.S. Department of Agriculture through the USDA Rural Development Guaranteed Housing Loan Program. There are income limitations, which vary by region. Applicants with credit scores of 640 or higher receive streamlined processing. Those with scores below that must meet more stringent underwriting standards.

CalHFA highlights and eligibility requirements

If you haven’t owned and occupied your own home in the past three years, you’re considered a first-time home buyer in California, and may want to choose one of these CalHFA programs as a more affordable path to homeownership.

Highlights

• Down payment and closing cost assistance available for low- to moderate-income borrowers
• Some condos, manufactured homes and properties with guesthouses or in-law quarters allowed

Eligibility

• Property must be located in California and be the borrower’s primary residence until it’s sold or refinanced
• In most cases, borrowers must be first-time home buyers and U.S. citizens, permanent residents or qualified aliens
• Must have a minimum credit score of 640, in most cases
• Must meet all income and sales price requirements of the lender and mortgage insurer
• Must take an approved home buyer education course and obtain a certificate of completion
• Leaseholds/land trusts and co-ops not permitted
• Property must be 5 acres or smaller in size
• There may be additional program-specific requirements

CalHFA first-time home buyer loan programs

MyHome Assistance Program

State program

BEST FOR

• Low income

• Down payment assistance

• Closing cost assistance

WHAT YOU NEED TO KNOW

This is a deferred-payment subordinate loan that low- to moderate-income first-time home buyers in California can use to make a down payment or cover closing costs when taking a CalHFA mortgage loan. “Subordinate” means it doesn’t have to be paid until the home is sold, refinanced or paid off. MyHome Assistance Program loans are limited to 3.5% of the home’s purchase price or appraised value, whichever is lower. Qualified borrowers are generally allowed to combine the MyHome Assistance Program with other down payment assistance or grant programs.

CalHFA Zero Interest Program

State program

BEST FOR

• Closing cost assistance

WHAT YOU NEED TO KNOW

This program can make CalPLUS Conventional and CalPLUS FHA loans even more affordable by paying a portion of your closing costs. The CalHFA Zero Interest Program provides up to 4% of the total loan amount in the form of a no-interest second loan. Payments on a CalHFA Zero Interest Program loan are deferred as long as you live in the home, but you’ll be required to pay it back in full if you sell, refinance, transfer the title to someone else or default on the loan.

School Teacher and Employee Assistance Program

State program

BEST FOR

• Teachers

• Public school employees

• Down payment assistance

• Closing cost assistance

WHAT YOU NEED TO KNOW

Like the MyHome Assistance Program, the School Teacher and Employee Assistance Program is a deferred-payment subordinate loan that helps pay for a down payment or closing costs . The difference, as its name implies, is this program is reserved for teachers, school administrators, school district employees and staff members of California K-12 public schools. Employees of charter schools and county/continuation schools are also eligible. School Teacher and Employee Assistance Program loans are limited to 4% of the sales price or appraised value, whichever is less. Qualified borrowers are generally allowed to combine the School Teacher and Employee Assistance program with other FHA-approved or Fannie Mae Community Seconds subordinate loans, but not the MyHome program.

Cal-EEM + Grant Program

State program

BEST FOR

• Energy-efficient improvements

WHAT YOU NEED TO KNOW

The Cal-EEM + Grant program is an FHA-insured Energy Efficient Mortgage for both first-time and repeat home buyers that has a 30-year term with a fixed interest rate. To help borrowers make energy-efficient improvements that are more than the maximum amount allowed by the FHA, this mortgage is combined with a grant of up to 4% of the total loan amount. The Cal-EEM + Grant program can also be combined with either the MyHome Assistance Program or School Teacher and Employee Assistance Program to help cover down payment or closing costs.

Summary: 2019 CalHFA first-time home buyer programs

• MyHome Assistance Program for assistance with down payment and closing costs.
• CalHFA Zero Interest Program for closing cost help on CalPLUS Conventional and CalPLUS FHA loans.
• School Teacher and Employee Assistance Program for educators, administrators and school and district staff.
• CalEEM + Grant Program for an FHA-insured energy efficient mortgage.

Now that you’ve got a general understanding of the first-time home buyer programs available in California, it’s time to dig into specifics. For full details on any of the programs listed above, Please call me, I will be happy to help on getting pre-qualified for a home, Call or Text (760)391-1741 or send an email: nadia@usdesertrealty.com

CalHFA doesn’t review applications or lend money; mortgage decisions are made by its network of preferred loan officers and approved lenders.

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Tips for First-Time Home Buyers

Being a first-time home buyer is exciting! But I know it can also feel overwhelming—especially when you see median listings priced at $306,000 and available homes flying off the market in 70 days.

With real estate trends like those, you might be tempted to make an impulsive purchase that could hurt your financial goals and keep you paying a mortgage well into retirement.

No one wants that! Trust me, you guys, it’s worth doing this the right way. And that means buying a home that you love and that doesn’t hurt your future money goals.

You may be thinking: Yeah, that would be great, Nadia. But where do I even start?

I’m so glad you asked! I’ve put together some good tips for first-time home buyers as they tackle the home-buying process. Put these into practice today so your first home is a blessing not a burden.

1. Pay Off All Debt and Build an Emergency Fund

Owning a home is expensive—much more expensive than renting, even if your monthly house payment will be similar or cheaper than your current rent amount. That’s because when you own a home, you’re responsible for all the maintenance and upkeep costs. And those can add up fast! So, before you even think about buying your first home, make sure you’re debt-free and have an emergency fund of three to six months of expenses in place.

When you get into a home with no payments (besides the mortgage) and have a nice big emergency fund, you’ll have the cash to pay for huge expenses that suddenly come your way. You’ll be able to love the life you’ve set up for yourself because stress and worry won’t be part of the equation!

Now once you’re debt-free, I want you to stay debt-free. So, as you’re shopping for your first home and getting excited about decorating and filling it with new furniture, be mindful of your budget.

You might have some empty rooms for a little while, but your budget and your future selves will thank you! And if you find yourself thinking, Oh well, I’ll just put it on credit—stop right there! Debt is dumb. Plus, taking on new debt in the middle of buying a house could delay your approval for a mortgage and make you miss out on the perfect home. Don’t do it!

2. Determine How Much House You Can Afford

Before you get emotionally attached to a beautiful house, check your monthly budget to determine how much house you can afford. You need to leave room in your budget for other things, so make sure your monthly housing costs (including HOA fees, taxes, insurance, etc.) are going to be no more than 25% of your monthly take-home pay.

For example, let’s say you bring home $5,000 a month. Multiply that by 25% to establish your maximum monthly house payment of $1,250. Based on a 15-year mortgage with a 4% fixed interest rate, here are the home options you can afford (not including taxes and insurance):

• $187,767 home with a 10% down payment ($18,777)
• $211,238 home with a 20% down payment ($42,248)
• $241,415 home with a 30% down payment ($72,424)
• $281,650 home with a 40% down payment ($112,660)

That’s an easy way to find a number in your ballpark. But don’t forget that property taxes and homeowner’s insurance will affect your monthly payment. You’ll also need to factor those numbers in before settling on a maximum home price.

3. Save a Down Payment

If saving up to pay the total price of a house in cash isn’t reasonable for your family’s timeline, at least save for a down payment of 20% or more. Then you won’t have to pay for private mortgage insurance (PMI), which protects the mortgage company in case you can’t make your payments and end up in foreclosure. PMI usually costs 1% of the total loan value and is added to your monthly payment.

If a 20% down payment seems out of reach for you, first-time home buyer programs that offer single-digit down payments may sound tempting. But don’t do them! These options will cost you more in the long run.

4. Save for Closing Costs

Along with your down payment, you’ll also need to pay for closing costs. If you’re a first-time home buyer, you may be wondering how much it costs to close on a house. On average, closing costs are about 3–4% of the purchase price of your home. Your lender will give you a specific number so you know exactly what to bring on closing day. These fees pay for important steps in the home-buying process, including:

• Appraisal
• Home inspection
• Credit report
• Attorney
• Homeowner’s insurance

Let’s see how this plays out with our example of a $172,600 home. If you multiply $172,600 by the higher 4% closing cost average, you’ll find that you need $6,904 for closing costs. Now let’s add that to your 20% down payment of $34,520. The two together equal $41,424, which is about what you’ll need to save to pay for the down payment and the closing costs on your first house.$172,600 x 4% = $6,904$6,904 + $34,520 = $41,424

You want to save for your closing costs and down payment as quickly as possible—with the same amount of intensity I tell people to use when they’re getting out of debt and building a full emergency fund. In fact, it’s okay to put retirement savings on hold for a short period of time to save for a home—but you’ve got to hustle!

Pick up a second job, sell whatever isn’t nailed down, move into a smaller space, add a roommate and charge rent—do whatever you need to do to save for your closing costs and down payment as fast as you can.

5. Get Preapproved for a Loan

Once you’re confident you have enough cash saved to pay for closing costs and 20% of your home, you’re ready to handle the other 80% by talking to a mortgage lender.

Get prequalified for a loan and take the extra time to get a preapproval letter before you start your home search. Preapproval shows sellers that you’re a serious buyer, which is a great way for first-time home buyers to get ahead in a competitive market.

To get preapproved, your lender will need to verify your financial information (proof of income, taxes, etc.) and submit your loan for preliminary underwriting.

Please call me, I will be happy to help on getting pre-qualified for a home, Call or Text (760)391-1741 or send an email: nadia@usdesertrealty.com

6. Find a Home for Sale in Your Price Range

As your Realtor of choice and after I have a good idea of what you’re looking for I will find a home that will fit your life, As a Realtor I have access to multiple listing service (MLS) to find homes that meet your criteria in your desired areas.

An MLS is created, maintained and paid for by real estate professionals to help buyers view the largest pool of properties for sale in the marketplace. Real estate agents also provide valuable market expertise and can help you find great deals on homes as soon as (or before) they’re listed.

7. Make a Competitive Offer (That’s Within Your Budget!)

Let’s say you found the home you want and can afford. Since you’re already preapproved for a loan, you’re ready to make an offer. If you’re a first-time home buyer, it may be hard to know how much you should offer. That’s when you can rely on my expertise.

As your agent I will help you make sure your offer is competitive but also within your budget and the home’s value. Be careful not to make an impulsive offer that’s higher than you can afford just to knock out the competition.

8. Prepare for Closing

Once a seller accepts your offer, the closing process will begin. Keep things running smoothly by knowing what to expect when closing on a house. The average closing process takes 41 days, which gives you plenty of time to tackle closing items. As your agent, I will schedule the remaining steps, from home inspection to final walkthrough, and keep you informed about any road blocks.

As you prepare for closing, make sure you read every document and ask me to explain anything you don’t understand—especially before you sign the official contract for the home transaction. It’ll be your signature on the documents, so you’ll be the one responsible for anything you sign.

Ready to Get Started?

Please call me, I will be happy in finding and helping you get your dream home, Call or Text (760)391-1741 or send an email: nadia@usdesertrealty.com

first-time homebuy, homebuying, houseloan, preapprove, prequalify