Buying your first home can be an anxiety-ridden experience if you don’t know the process necessary to purchase a home. You will be bombarded with terms you’ve never heard, the need to scrape together a down payment and then there are the fees that are added to the cost. Fees to pay the appraiser, the surveyor and the home inspector are enough to leave the most stalwart of us left shaking our heads. Learning the process and knowing where you can find incentives to help defray the cost of your home purchase will help relieve some of the anxiety. Find an incentive program that will work for you then discover your new home at Movoto.
What are First Time Home Buyer Incentives?
First time home buyer incentives are offered by lenders to make purchasing a first home more affordable. By offering loans with low or no money down buyers are enabled to purchase a home for which they may not otherwise be able to qualify. FHA and VA loans are guaranteed by these entities which saves the buyer a monthly private mortgage insurance (PMI), expense.
Are you a First Time Home buyer?
You may be and not know that you are which could cause you to miss incentives that will help you get in to a new home with less cost to you. You may also meet the criteria for an n FHA or VA loan, too, of whom can help you get an affordable loan.
The U.S. Department of Housing and Urban Development’s (HUD) definition of a first time home buyer is as follows.
- A person who has not owned a principal residence during the three years that ends on the date of the property purchase. This includes spouses. If either meets the above test then they are considered first-time home buyers.
- A single parent who has only owned a home with their former spouse while they were married is considered a first-time home buyer.
- An individual who is a displaced homemaker and who only owned a home while they were married is a first-time home buyer.
- A person who has only owned a principal residence that is not permanently affixed to a permanent foundation in accordance with applicable regulations. An example of this is a mobile home.
- An individual who has owned a property that does not comply with local, state, or model building codes and cannot bring the structure into compliance for less than the cost of constructing a permanent structure, also meets the criteria as a first-time homebuyer.
As you can see, many people fit into the category of a first-time home buyer and there are many incentives to help you purchase your first home.
Can you qualify for an FHA Loan?
Available to first time home buyers with less than stellar credit, an FHA loan requires a down payment of 3.5 percent. That means that for a $200,000 home your down payment will about $7,000, instead of $40,000, which is what would be required on a loan that requires a 20 percent down payment. This is a significant savings, upfront, but it will cost you in higher monthly payments over the term of the loan.
Because FHA guarantees your loan, you will not be required to pay private mortgage insurance (PMI). This will save you an extra monthly payment, as PMI costs .5 to one percent of the loan amount. On a $200,000 mortgage, that can be a savings of $2,000 if PMI is rated at one percent.
Can you qualify for a VA Loan?
Many individuals are eligible for a VA loan and it is an affordable way for a veteran to purchase a home. To qualify for a VA Loan you must meet the following criteria.
- You must have served for 90 days during a time of war,
- You must have served 181 days during times of peace
- You must have served six years in the national guard or reserve duty
- Or you must be a qualifying spouse of a deceased veteran and not remarried.
Much like an FHA loan, a VA Loan has a low down payment and no PMI. The Veteran’s Administration guarantees the loan enabling veterans to purchase a home affordably. Along with the above criteria, you must have stable income that is sufficient to cover your mortgage and your monthly expenses.
Are there other programs for First Time Homebuyers?
Fannie and Freddie Mac have programs that offer down payments as low as three percent. They work with local lenders to offer these programs to buyers. The difference between these loans and an FHA or VA Loan comes down to PMI. This will add an extra monthly expense to your mortgage payment.
The U.S. Department of Agriculture (USDA) also offers 100 percent loans that don’t require a down payment for first time home buyers. Targeted toward rural areas this may be the perfect way for you to purchase a home.
Your state may offer first time homebuyer programs and you can find that information here. State programs include low interest rates and low down payment options to first-time homebuyers that considerably reduce the amount of money required to purchase a home.
Will one of these incentives work for You?
Knowing what first time home buyer incentives are can save you money.Talk to your lender and find out if you are eligible for first time homebuyer’s incentives. You may and if you do, you can save thousands of dollars getting into a new home. Home buyer’s incentives make home ownership easier and more affordable than a conventional loan that requires a 20 percent down payment.
2 Point Highlight
First time homebuyer incentives, are offered by lenders to make purchasing a first home more affordable.
Talk to your lender and find out if you are eligible for first time homebuyer’s incentives.
