Buying a home can be a stressful, expensive journey for those who have never done it before. However, you do not have to make the journey alone. There are several programs that help first-time homebuyers finance their first home. In Tennessee, there are both Federal and Local programs that will help you get that first dream home.
What Loan Programs Are Available?
Before you think about putting down 20% on a new home mortgage, it would be a good idea to see if you qualify for any first time home buyer loans. On the Federal level, there are several loan programs available, including FHA, Veterans Administration, and Rural Development Loans from the USDA.
FHA Loans
An FHA loan comes from approved lenders by the U.S. Department of Housing and Urban Development. These loans typically have lower down payments, sometimes as low as 3.5%. The reason the lenders can do this is because the Federal Housing Administration insures the loans directly, similar to how student loans are federally insured. This takes the risk of the loan off of the lender and onto the government.
FHA loans usually do not have as stringent of credit requirements as a standard loan, but they still do have standards. When applying, an FHA lender will look at your payment history, income and other factors to make sure you are getting into a home you can afford, but that you will also honor your commitment to pay the mortgage on time.
Veterans Loans
The Veteran’s Administration has a loan program for active and retired service members, including surviving spouses. The length of the qualifying members service, what kind of duty status they had, and how they were discharged all play a factor in eligibility on VA loans.
To start the process, you need to get a Certificate of Eligibility from the VA. You will need to prove your service through discharge forms, or if you are active duty, through statements of service from your commanding officer or adjutant.
Once you have this information, you can go to a VA-certified Lender and begin the process of getting the loan.
USDA Loans
The United States Department of Agriculture also runs a home loan program for those seeking homes in rural areas. These loans are designed for low and moderate income households looking to buy a home. These loans have an income-eligibility and can only be used in areas that have been deemed eligible by the USDA. The majority of Tennessee is eligible for these loans, except for the major metropolitan areas like Nashville, Memphis, Chattanooga, and Knoxville. These particular loans are exclusive to rural areas. The USDA website allows for users to put in the address of the home to see if it is eligible.
To apply for one of these loans, you have to start by contacting an approved lender. Like VA and FHA loans, the government is the guarantor of the loans, not the lender. You also must meet the credit requirements and not have been disqualified from other federal programs, like SNAP or Federal Student Loans.
Great Choice Loan
Tennessee has a program known as the Great Choice Program, which is put together by the Tennessee Housing Development Agency. This program is a 30-year fixed interest rate loan that has several programs for helping with down payments and other closing costs.
This program has very specific qualifying requirements, including a minimum credit score of 640. They also have an income qualification, depending on what county you want to live in, as the program is only for low to moderate income homebuyers. They also require anyone interested in a loan to attend a homebuyer education course, which is conducted by THDA-approved sites. Finally, the price of the home can not be above a maximum purchase price. Again, this number differs depending on the county.
What Grants Are Available?
Not every program available is just a lower rate loan with a cheaper down payment. The Federal Government gives money to the states to administer some grant programs to help people buy homes as well. Â These programs are usually in conjunction with a home loan program, such as the Great Choice Program, which means that they will not cover 100% of the cost of buying a home.
Several programs in the Tennessee area are available for those who are living in rural areas and are living in poverty or are disabled. The Southeast Tennessee Resource Conservation and Development Council, for example, is a non-profit program that helps poor communities get back on their feet and helps its residents get into programs such as Habitat for Humanity and other grant programs.
No matter what program you decide to go with, or even if you decide to go with a traditional loan, it is important to know that your credit is one of the biggest factors in qualifying for any type of loan. So if you still haven’t looked at your credit report, now is the time to do so. Check it and see what your score is and do what you can to make sure it is accurate. If you have any late payments, catch up on them. If you have any closed accounts in collections, pay them off. With most of these programs, it is vital to show that you are willing and able to make your payments on time and that you can afford to pay for a home.
2 Point Highlight
Before you think about putting down 20% on a new home mortgage, it would be a good idea to see if you qualify for any first time home buyer loans.
In Tennessee, there are both Federal and Local programs that will help you get that first dream home.
