4 benefits first-time homebuyers should know about
Home prices are dropping and this fall is looking particularly buyer-friendly
After many years of a tough housing market for potential buyers, things may finally be starting to soften. Mortgage rates "stayed flat" in the first week of September and are "expected to decline even further," said Realtor.com, while "home prices continue to fall" and "the number of houses for sale rises." All of this is shaping up for what could be a "buyer-friendly fall," and potentially a long-awaited opportunity for first-time homebuyers.
While a friendlier market certainly helps, that is not the only help that first-time homebuyers can get. There are several programs and options that can also smooth the path to home ownership. (And as a note, first-time homebuyers include more than just those who have not ever owned a home — the definition technically extends to those "who haven't owned a home in the three years prior to purchasing their property," said CNN Underscored.)
1. Government-backed home loans
"Government-backed mortgages can allow you to get a home with a low down payment or poor credit," said Rocket Mortgage. Because "the government insures government-backed loans," they "pose less of a risk to a mortgage lender." Options include:
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
FHA loans: These are "a great option for first-time homebuyers due to their low down payment and relaxed credit score requirements," though borrowers do "have to pay for mortgage insurance," said CNN Underscored.
VA loans: Those who are "active-duty military members, veterans and surviving spouses" can access benefits through the U.S. Department of Veterans Affairs (VA), including VA loans, which "provide competitive interest rates and require no down payment" and have no minimum credit score requirements, said Investopedia.
USDA loans: If you are a first-time homebuyer interested in "homes in rural areas that are currently in poor condition," the U.S. Department of Agriculture's (USDA) homebuyer assistance program is an option, said Investopedia. The program "offers up to 100% financing for people who want to buy and upgrade a home."
2. Down payment and closing cost assistance
First-time buyers also have access to a number of resources that can help them with their down payment, "a large initial expense that's a percentage of the home's purchase price" and that "is required for most types of mortgage loans," said Rocket Mortgage. You might also be able to get help covering closing costs, which are "additional fees you pay at the end of the mortgage process" and "typically around 3% – 6% of the total loan amount."
For instance, "many first-time homebuyer programs offer a lower-cost first mortgage to help you buy the home, then a second mortgage to help you cover your down payment and closing costs," known as a down payment assistance loan, said Bankrate.
There are also down payment grants, which is "essentially free money to help you cover your down payment or closing costs," said Bankrate. These "are usually awarded to low- or moderate-income borrowers," and "they might have other requirements, too, like a minimum credit score and maximum home purchase price."
Another option are down payment savings match programs, which "provide matched funds up to a certain amount," with that money only usable "for your down payment and closing costs," said Bankrate.
3. State-based programs
"Most government home buying assistance comes through state and local programs," with the specific offering "depending on your location," said Rocket Mortgage.
To find out what resources are available to you, "head to HUD's State Information directory and select your state," and then "click on 'Learn about homeownership' and then 'Assistance programs,'" said CNN Underscored. There, you will "find a list of the assistance resources available statewide and in specific counties and cities."
4. Employer-sponsored programs
Believe it or not, your employer may offer some assistance when it comes to buying your first home. Known as employer-assisted housing (EAH) programs, these "are often limited to certain occupations, and there could be other restrictions, such as a first-time homebuyer or specific tenure requirement, or income limits," said Bankrate. Still, "this assistance can come in many forms, such as a forgivable loan coupled with required homeownership education" or grants.
As an example, the University of Chicago "offers a limited number of grants worth $5,000 to $20,000 to qualified employees who want to buy homes in eligible local neighborhoods," said CNN Underscored.
You can find out if this type of assistance is offered through your employer by asking HR about EAH programs.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She previously served as a deputy editor and later a managing editor overseeing investing and savings content at LendingTree and as an editor at the financial startup SmartAsset, where she focused on retirement- and financial-adviser-related content. Before that, Becca was a staff writer at The Week, primarily contributing to Speed Reads.
-
Today's political cartoons - December 21, 2024
Cartoons Saturday's cartoons - losing it, pedal to the metal, and more
By The Week US Published
-
Three fun, festive activities to make the magic happen this Christmas Day
Inspire your children to help set the table, stage a pantomime and write thank-you letters this Christmas!
By The Week Junior Published
-
The best books of 2024 to give this Christmas
The Week Recommends From Percival Everett to Rachel Clarke these are the critics' favourite books from 2024
By The Week UK Published
-
How much should you spend on holiday gifts?
The Explainer Let your personal budget be your guide
By Becca Stanek, The Week US Published
-
What exactly are tariffs and how do they work?
The explainer Refresh your understanding ahead of Donald Trump's promise to levy heavy tariffs once he's back in office
By Becca Stanek, The Week US Published
-
How to choose a high-yield savings account
The Explainer What to consider, from interest rates to fees to accessibility
By Becca Stanek, The Week US Published
-
4 tips to finally start your small business in the new year
The Explainer Make your dream a reality
By Becca Stanek, The Week US Published
-
Looking to earn extra money around the holidays? 6 ideas for seasonal side hustles.
The Explainer Pad your paycheck
By Becca Stanek, The Week US Published
-
Online shopping scams to look out for and how to avoid them
The Explainer Black Friday is a busy time of year for scammers
By Becca Stanek, The Week US Published
-
Is a travel credit card worth it? How to decide and pick the right one.
The Explainer Upsides include travel-related benefits and welcome bonuses
By Becca Stanek, The Week US Published
-
How IRAs work and what advantages they offer
The Explainer An IRA is a retirement savings account with tax benefits
By Becca Stanek, The Week US Published