Grants for FTHB are largely different from first time home buyer loans, mostly because, unlike loans or mortgages, grants for buying homes are non-refundable. Great, so, that means you can just walk into your local federal housing agency and ask for some money, for, say, buying a house with bad credit, right? Not exactly. The other essential difference between first time home buyer grants and a first time home buyer loan is that, while the latter is given to an individual or household, the former is made available by the federals government to a state, city, or nonprofit based within a certain community. Such grants target areas were the fed wants to revitalize the community by encouraging new construction, rental, and purchase of housing. Consequently, it gives out the money to a specific agency, which then distributes it to individuals.
The basic rules of a first time home buyer grant
First off, you shouldn’t expect a FTHB grant to cover too much of the cost of a new home. Most such grants will pay for up to 10 percent of the total value, usually in the form of specific expenses, like closing costs. To find out if you’re eligible, you need to know if you’d qualify for getting a mortgage; if so, you can probably also get a FTHB grant, too. Last but not least, the federal government requires all applicants to first time home buyer programs to attend classes on HUD loans. This, in turn, improves their mortgage eligibility status. The HUD has a full list of courses and available counselors listed on their website; bear in mind that the availability of courses, as well as other HUD programs, will differ from one state to the next. For instance, first time home buyer Florida programs from the HUD include Habitat for Humanity, the Florida Housing Finance Corporation, and the Florida Department of Community Affairs.
Major 1st time home buyer grant programs
HUD’s HOME Investment Partnerships Program
Each year, this program which is exclusively dedicated to low-income home ownership, doles out some $2 billion to this end, across the United States. Eligibility conditions will differ widely from one type of funding to the next. For rentals, at least 90 percent of the beneficiary household must earn 60 percent or less than the median income for the area, as adjusted by the HUD. For rental units, at least 20 percent must be occupied by families with incomes of up to 50 percent of the HUD-adjusted median income in the area.
The American Dream (ADDI) Grant
This federal grant program, ratified in 2003, though limited to $10,000 or 6 percent of the home’s selling price, was the most successful federal grant program for FTHBs. Originally scheduled to run through 2008, it is estimated to have awarded some $200 million in grants each year.
HUD 203(b) Mortgage Insurance
Mortgage insurance can significantly up one’s home loan cost, which is why HUD can also help with insuring the loan in question. First off, you need to obtain PMI, then make sure you’re eligible for FHA credit, as well as for 97 percent financing and upfront mortgage premiums. You’ll be directly responsible for paying the yearly premium yourself and you’ll also need to check the local mortgage insurance limit in your state or area.
Aside from those mentioned above, the HUD website offers information on Community Development Block Grants, Emergency Shelter Grants, and Housing Opportunities for Persons with AIDS. HUD also provides access to state- and local government-ran programs, and organizations that secure housing assistance, like Habitat for Humanity.