Cute small house

Buying your first home can be equal parts exciting and nerve-racking. It’s exciting because you’re getting a place you can call your own. It’s nerve-racking because there are a ton of issues to consider.

Knowing how much you can afford ahead of time helps ease a number of concerns. So does getting your credit in shape.

If you’re buying your first home, you may not realize there are various programs and options available to you in order to make the goal of homeownership even more attainable. Let’s run through some of them.

HomePath Ready Buyer™

Fannie Mae offers first-time home buyers the option to purchase one of the properties it owns for as little as 3% down. Better yet, you can apply to get up to 3% back in closing cost assistance in the form of seller concessions.

As with any program, it has some specific requirements. Let’s quickly touch on these:

  • You must be a first-time home buyer, meaning you haven’t owned residential property in the last three years.
  • You have to be buying in primary property, meaning you intend to make it your permanent residence.
  • The home must be a foreclosure or other REO property listed on Fannie Mae’s HomePath site.
  • You have to take and pass a $75 homeownership course from Framework Homeownership. You can get this fee back later on as part of your seller concessions.

One thing to note is that these properties are foreclosures and typically sold as is, but the closing cost assistance may help you budget for any remodeling work that needs to be done. In general, you may be able to get a better deal on fixer-upper properties if you’re willing to do a little work.

The Department of Housing and Urban Development (HUD) maintains a list of properties owned by the government and other private mortgage investors.

Government and Charitable Grants

When you get a home, you should budget for the down payment and closing costs. However, the full amount doesn’t always have to come from your own funds. Let’s look at a few options for assistance.

A good place to start is HUD’s list of state and local home buying programs. You can also look for programs available from your local or state housing authority.

Beyond government funding, you can also look for local charitable organizations that provide help with the cost of getting into a home.

You should be aware that the structure of the grant can affect your options for mortgage financing. In general, you will have a harder time getting a loan if the grant places a lien on the property or requires that another entity besides the mortgage lender gets the first chance at repayment if the property is foreclosed (first-lien position). The grant also can’t have a requirement that it needs to be repaid – outside of limited exceptions for employer assistance. We’ll touch on that next.

Not all forms of down payment and closing cost assistance are available for every loan. Consult with a Home Loan Expert for details.

Employer Assistance

Many employers also offer employer assistance, which often takes the form of a loan that is forgivable if you stay with the company for a certain number of years. You may also be able to get assistance from your labor union.

Be sure to speak with your employer about the type of assistance offered because your lender will need to know what the repayment terms are, if any. You’ll also need records of the dollar amount and how the funds get transferred.

Borrowing from Retirement Funds

If you’re looking at houses right now, you know they don’t come cheap. If you want to make a significant down payment, you’re also likely facing a substantial upfront investment.

We always advise talking to your financial advisor and/or tax professional, but one option you have is to take a loan from your retirement funds if your employer-sponsored retirement plan allows. This money is then paid back over time on a set schedule. You should be aware that if you’re under 59 ½ years of age and don’t pay the loan back in time, it counts as an early distribution and is subject to a 10% additional tax penalty.

If you’re a first-time home buyer, you can also take up to $10,000 out of an IRA for a down payment or other mortgage transaction cost. For the purposes of this rule, the IRS defines a first-time home buyer as someone who has no interest in a primary home for two years leading up to the closing on the home.

After you take the distribution from your IRA, it has to be used within 120 days to close the transaction.

Again, please speak with a tax professional to determine the right financial move for you.

Mortgage Credit Certificate

A mortgage credit certificate is available for low- to moderate-income buyers. Administered by state or local governments, it enables you to take a credit for a reduction of your tax bill based on your mortgage interest.

The IRS has more information, but if you’re considering applying, reach out to your local housing authority.

For more information on the process of purchasing your first home, we invite you to check out Zing University, our comprehensive course for first-time home buyers.

If you’re ready, you can go over your options online with Rocket Mortgage® by Quicken Loans. One of our Home Loan Experts would also be happy to talk to you if you give us a call at (800) 785-4788. If you have any questions, you can let us know in the comments below.

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This Post Has 6 Comments

  1. We signed a 30 year note and we missed a payment due to job lose. Being our first home, we want to refinance and just want to save money and more..
    Can you help?

    1. Hi Tonya:

      If you only missed one payment, it probably won’t make as big of a difference as you think. If you’ve only had one late payment in the past year, you could still have a number of the loan options available to you. In addition, the older the missed payment, the less of an effect it will have on your qualifying credit score. If you would like to check your options online, you can do so through Rocket Mortgage or go ahead and give one of our Home Loan Experts a call at (888) 980-6716 to go over your full situation. Hope this helps and have a wonderful night!

  2. Question I’m a single mother and I’m trying to buy a home my credit isn’t the best I have couple of collections. I’m wondering what options do I have.

    1. Depending on the type of loan you get as well as the sum total of the collections, you may have to pay off the collections in order to get the loan. However, every situation is different. I’m also going to recommend you check out the resources from our friends at QLCredit. You can get your free VantageScore® 3.0 credit score and report from TransUnion every two weeks. Although not your official FICO® score, it’ll give you an idea of where you’re at as well as giving you practical tips on how you can improve your score to get it to where you would need to be. For reference, a person with a 580 FICO score and very little debt may be able to qualify for an FHA loan. Conventional loans start at 620 as do USDA and VA loans originated by Quicken Loans. You can check out this blog post for general credit improvement tips.I’m also going to recommend you speak with one of our Home Loan Experts at (888) 980-6716 to go over your situation thoroughly. Have a wonderful day!

  3. My name is Marilyn A. Brown and I am a first time homebuyer. Presently, I am a state employee with the Department of Workforce Services located in Arkansas.

    My desire is to relocate my state employment to Georgia and purchase my first home. Please provide any helpful information for relocating. Thank you for your time. I look forward to hearing from you.


    Marilyn A. Brown

    1. Hi Marilyn:

      I’m going to go ahead and give you the best resource we have for first-time home buyers. Zing University is our comprehensive first-time home buyer course that you can use to walk through everything you need to know and think about when it comes to the home buying process.

      Once you are ready, you can get an online mortgage approval through Rocket Mortgage or give one of our Home Loan Experts a call at (888) 980-6716. Have a great day!

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