Where to Find First-Time Homebuyer Grants

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Buying a home can be your first real step toward financial stability, but for so many people it’s difficult to accumulate the amount of money necessary to put up a down payment and cover closing costs. In fact, according to a 2017 survey by GoBankingRates, 46 percent of Millennials aged 18 to 24 have no savings. Their older counterparts aren’t faring much better, with 41 percent of 25 to 34 year olds also running on empty. Only 20 percent of the people in the older group and 13 percent of the younger group have $10k or more in savings.

Does this mean that homeownership is a closed door to you and the rest of your demographic? Not if they -- and you -- are savvy and willing to do a little extra legwork.

Homebuyer Grants for Everybody

The truth is that homebuyer grants aren’t actually for everybody, but they are for a lot of people. In fact, there are so many out there that unless your income is exceptionally high for the area or you’re on a tight schedule, you’ll probably find plenty of places that will give you a grant or something similar to get into your first home.

There are basically three different types of first-time homebuyer assistance programs:

  • Grants. This is free money that you’re gifted. You don’t have to pay it back under any circumstances and there aren’t any strings attached.
  • Soft secondary mortgages. There are a number of programs that will happily give you most of your downpayment as a sort of conditional second mortgage. It’ll show up on your house’s deed like a debt, but every year the amount you owe will shrink -- even without you paying a cent on the second mortgage! Unless you fail to fulfill the terms that came with the money, the total amount will eventually be forgiven in whole. And again, without your having paid anything toward it.
  • No downpayment programs. These are rare and hard to come by, but there are a few left out there. Be cautious, review all the terms carefully, and ask any questions you have before signing.

Most of these programs have monthly, quarterly, or yearly caps on how much money they can distribute. Therefore, if you want to use one, your best bet is to do it early in the year before the buying frenzy of the summer. The programs will run out of money and then you just have to wait until the next year.

A Directory of Free Money!

When it comes to grants, soft secondary mortgages, and no-downpayment programs, each program has different criteria for the buyers and houses they’ll accept. Our advice? If you’ve been rejected from one, don’t stop there. Keep trying! Your banker should be able to give you information on some, if not all, programs available in your area.

These are just a very few examples of what’s out there in the wild:

Private Programs

Although less common than programs from government entities, sometimes private companies are willing and able to help a first-time homebuyer find their financial feet. Check with your employer, as well as any clubs or associations you belong to. And, while you’re at it, ask your bank if they have anything clever you can take advantage of.

For example, Quontic Bank, headquartered in New York state and with branches in New York, Georgia, Indiana, Massachusetts, Florida, and Virginia, has a program called the First Home Club. Your monthly savings account deposits can earn you up to $7,500 in grant money. For every dollar you deposit and save, the bank will match four more if the expressed purpose is for a downpayment on a home.

Local Programs

Your city probably has some kind of grant money or homebuyer assistance available, if you ask the right person. Planning and Zoning is a good place to start, unless your city government has a “Community Development” department (in which case, start there!). These programs can appear in any form and are usually available as part of an effort to clean up certain areas of the city or to protect certain districts.

The Newton, Massachusetts Homebuyer Assistance Program, for example, offers both downpayment and closing costs assistance on homes that are deed-restricted as Affordable Housing. The City of Lewisville, Texas First Time Homebuyer Assistance Program is a similar program, drawing funds from a community development block grant. Future residents can get help with downpayments, closing costs, and even principal reductions on their soon to be homes if they qualify.

State Programs

Many states also offer financial assistance to first time homebuyers in different ways. Most have some sort of Mortgage Revenue Bond or State Bond Loan Program, which gets funding from selling mortgage revenue bonds to the public. These bonds are just like other government bonds, in that they’re considered investments, so they have an interest rate and a maturity date for the person doing the bond-buying.

The loans that result are sometimes subsidized, often come with most or all of the downpayment covered, but may also come with conditions and a soft second that remains with the property for up to 10 years.

Other programs, like Homes for Texas Heroes Home Loan Program, is available only to people in certain professions, including firefighters, nurses, teachers and military veterans. They may also be limited to particular neighborhoods where there’s need for community improvement. A sister program to Texas Heroes is the Homes Sweet Texas Home Loan Program, which is available to buyers with limited incomes.

National Programs

Along with the private, local and state options, a few large federal programs for first time homebuyers exist. They come in every form, from grants to educational programs that allow you to earn your downpayment as you learn how to be a responsible homeowner. These are just a few of what is available out there:

Buying a House Can Be Really Expensive…

...But we’re here to help. If you’re interested in getting hooked up with the best first time homebuyer grants or other forms of assistance, just connect with us at Home.Loans. When we’re not helping home buyers, they make us do horrible chores like cleaning the ceiling fans!