First-time homeowner grants can help when you want to buy a house but struggle to save a down payment

New Home for Sale / Hoping to Be a First-Time Homeowner? How to Find Grants Meant Just for You
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May 05, 2017

Down payments are one of the biggest obstacles for hopeful homeowners, especially those living in low- and middle-class households. It can be tough to save when you’ve got a laundry list of bills.

That said, there are resources out there for first-time homebuyers—it’s simply a matter of finding them. One such resource is the first-time homeowner grant, which can help you buy a home with a down payment of zero.

How the Grants Work

First-time homeowner grants are used together with low-down-payment mortgages. They’re meant to cover the down payment requirement. When you combine a grant with the first mortgage, you can buy a house without a down payment.

There are some aspects of the grant that you should know about when considering one. In general, they are meant for first-time homebuyers, and they can only be used to purchase a house that the homeowner will live in most—if not all—of the time. They can’t be used to buy an investment property or a vacation home.

In addition, grants have limits. One such limit is the cap that is usually placed on the actual dollar amount of the grant—the funds are not unlimited. There are also usually income limits, which can vary from one county to another and are generally based on the area’s median household income. And when you take part in a grant program, you will likely have to take some kind of home-buyer education class.

Finally, you should know that the grants are actually loans. Typically you will have to make a small monthly payment, but the balance may be forgiven if you make your payments consistently and on time for a long period of time. And because the program’s interest rate is subsidized, it will usually fall below market rates.

Finding Programs in Your Area

The best way to find available programs where you live is to contact your local government office, including the state, county, and municipal levels. These are often the sponsors of such grants, and they might also be able to recommend any private-source programs.

Another is to ask the mortgage lender. They will know the most popular programs since they work with many different ones. Mortgage resource website HSH lists programs by state.

Finally, the U.S. Department of Housing and Urban Development can help you find payment assistance programs provided by non-profit agencies in your state.

Requirements

Both mortgages and grants have requirements that homebuyers have to meet. For mortgages, these can include good credit, employment, income, and the amount of debt you have in comparison to your income. Grant requirements vary depending on the particular grant; however, chances are that if you qualify for the first mortgage, you’ll also qualify for the grant.

Lenders

First, find a grant program you’re interested in. Next, find a lender that participates in it. Not all lenders take part in such programs, and you don’t want to waste your (or their) time. Programs often have a list of local lenders that work with them.

When you find one, make sure that the mortgage loan officer you’re working with has actually worked with your grant program before. Every program is different, so the officer needs to be familiar with yours.

The Paperwork

You should know that grant programs will probably require you to fill out more paperwork in addition to what you’ll have to fill out for your mortgage. Make sure to complete it as fully and accurately as you can and provide any necessary supporting documentation.

First-time homeowner grants make it possible for people to buy a home who might not be able to afford it otherwise. As long as you meet the requirements, this could be a good option for you if a down payment would be a struggle.

Source: Money Under 30: “How To Find And Apply For First-Time Homeowner Grants”