Purchasing a home for the first time is a phenomenal accomplishment. Home ownership is often seen as the biggest investment a person can make in their life, and it can have a big payoff over a long period of time. It can have some hurdles that make the whole process seem intimidating, but there are usually options to help guide potential buyers who may not be familiar with the real estate market.
In the state of Alabama, there are certain programs available to first time home buyers. Some of these are designed to make the process of buying a home easier, or help make home buying more affordable for those that need it. The programs are often directed at all home buyers, but can be quite beneficial for first time home owners so long as they meet the necessary requirements.
What Programs Are Available?
The state of Alabama has a few programs available for homeowners and potential home buyers. Most of the programs are designed to offer some capacity of assistance for those looking to purchase a home. The programs vary based on the location of the home and may apply to certain demographic groups. Information about the programs offered in Alabama can be found through the United States Department of Housing and Urban Development, or HUD.
Most of the programs offered by HUD and the state of Alabama are designed to function as guidance programs for buyers to prevent anyone from becoming the victim of a scam. They work as a go between for potential buyers and sellers. They also offer assistance programs for those who need help purchasing and maintaining their home. Typical programs include branches of Habitat for Humanity, affordable housing, housing financing, and foreclosure prevention. All the groups tend to work in tandem with one another and are location based. Some cater to specific communities while there are a few that will work throughout the state.
Here are a few of the programs available:
- USDA 100% Financing Program – This program requires that the property is located in a targeted area. There is no down payment required and the buyer should have a minimum credit score of 640.
- FHA Program – This program has a low down payment and buyers must have a minimum credit score of 620. There are several property types that meet the eligibility requirements.
- HomeReady Program – This program is designed to help low to moderate income families or individuals. A minimum credit score of 620 is required. There is a low down payment.
- Good Neighbor Next Door – This program is designed for police officers, educators, firefighters, or EMTs. Participants in this program can get a 50% discount on homes in targeted areas.
Sometimes it can be difficult finding a legitimate program or resource to help with home buying, and sometimes a wrong decision can turn what is supposed to be a wonderful thing into a nightmare. Amongst the programs that HUD offers is a search system for counseling agencies that are approved by HUD and the federal government. Agencies and businesses associated with the program are usually well vetted and have been verified as legitimate. They are also often monitored for issues that can cause a negative impact on the Alabama real estate market and buyers. The programs will also keep potential buyers up-to-date about predatory lending and other such scams that can harm first time home owners.
What Incentives Are There for Buying a Home?
As stated earlier, buying a home is an investment that can have quite the return. The real estate market is constantly in flux so it can be difficult for a person to see any reason to purchase a home. Many real estate professionals and mortgage groups are offering incentives in some communities. Usually, an incentive is offered to try to bring people to the area and increase the homeowner population in the community. The average incentive usually involves covering some of the closing fees, which are not usually included in the listing price of a home.
Closing costs are the additional expenses that come with buying a home and can sometimes cause some panic for first time buyers. Mostly, they can include things like the insurance and search fees for the property title and other fees like escrow and inspection. The covering the fees for the title is usually a typical offer, depending on the location. Inspection fees can run cost a few hundred dollars for a standard inspection, with the inspector chosen by the buyer. An escrow agent can cost a bit more, usually around several hundred dollars but it varies by agency and location. Other closing costs may include homeowners insurance, warranties, property taxes that accumulated during listing, and moving expenses.
How Do Your Receive a Grant?
A grant is a type of loan provided by the federal government where there typically isn’t any type of repayment required. There are usually certain criteria a person must meet in order to receive a grant. Most of the grants offered by the state of Alabama involve housing repair, usually for cases where unpredictable weather conditions have caused high quantities of damage that might not be covered under homeowners insurance. They are typically available through the United States Department of Agriculture (USDA) or the Department of Housing and Urban Development (HUD).
One of the largest grant programs in Alabama comes through the USDA and is geared towards single family homes. Simply known as the Section 504 Home Repair program, the loan is applicable for low income homeowners seeking to make repairs on their homes to help improve their home, usually for health and safety reasons. Qualifications for the grant requires you to be the homeowner and be actively living in the home. Total income for the family must be at least 50 percent below the median income for the area, and you must not be able to find credit or loan options elsewhere.
There may be an option to have it function more as a regular loan, but there will largely be no requirements for repayment if you are not able to and/or for applicants over the age of 62. In cases where there is a repayment required, it is usually over a time of 20 years with a fixed interest rate. Sometimes, applicants may qualify for a loan/grant combination, where only a portion of the money given will need to be repaid. The grants must be used for their designated purpose and will have a limit as to how much money will be rewarded. Maximum values range from $7,500 to $27,500 based on the loan type and circumstances.
There usually isn’t a specific set time when a person can apply for a loan or grant and they are usually available year round. The process usually works according to the order in which applications are received and the amount of time it can take to have an application approved will depend on your location. Certain locations might have more requests for funding than others and it can take time going through the applications. Information for the program are always subject to change so it’s best to contact the HUD or other Housing representatives for your area in order to make sure that you are up-to-date.
2 Point Highlight
One of the largest grant programs in Alabama comes through the USDA and is geared towards single family homes.
There may be an option to have it function more as a regular loan, but there will largely be no requirements for repayment if you are not able to and/or for applicants over the age of 62.
