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First Time Homebuyer

Get Help as a First-Time Homebuyer

If you are interested in becoming a first-time homebuyer, you have many aspects of your finances to consider. The United States Department of Housing and Urban Development (HUD) offers Homeownership Vouchers to qualifying individuals and families to aid with the big purchase that is a first home. If you qualify, you can enjoy the financial support of this HUD program to meet your monthly payments. Learn more about the programs available to first-time homebuyers below.

Homeownership Voucher Program

The Homeownership Voucher Program helps with your monthly mortgage and other homeownership expenses. While HUD is a federal agency, all homeownership vouchers are issued through your local public housing agency (PHA). The qualifications are determined locally, based on average income, housing costs and other factors determined by the local agency. If you already participate in the Housing Choice Voucher program and receive rental assistance, you might be eligible to participate in the Homeownership Voucher Program.

Find out Your Area’s Requirements

You can contact your local PHA directly for eligibility and income requirements to participate in the Homeownership Voucher program. You can find a full list of PHA offices on the HUD website. Keep in mind that not all PHAs participate in the voucher program. If your local PHA participates and you meet their eligibility requirements, the down payment on your first home can be as low as 3.5 percent of the total purchase price.

Homeowner Voucher Requirements

If you receive Housing Choice Vouchers for rental assistance, you must first also qualify for a mortgage in order to apply those vouchers under the Homeownership Voucher Program. Your local PHA can guide you through that process. If you qualify, your Homeownership Vouchers can be used for mortgage payments, property taxes and other standard homeownership costs and expenses.

To be eligible for Homeowner Vouchers, you must meet the following basic requirements (note that requirements differ for disabled or elderly individuals or families and that certain restrictions apply to cooperatives as well):

  • You must be a first-time homebuyer. Alternative, you cannot have been a homeowner or have had any ownership interest in any residential property for the previous three years.
  • You must meet the PHA’s minimum income requirement. To calculate your eligibility, multiply the federal minimum wage by 2,000 hours. Your annual income must exceed that total. You cannot include welfare assistance while calculating your total income.
  • You must meet the employment requirement, which means that at least one adult who will own the home must have been employed full time for the previous year and must continue to be employed full time now.
  • You will be required to attend and complete your local PHA’s homeownership and housing counseling programs.

Be aware that your local PHA can also include additional eligibility requirements.

Regulations vary for elderly or disabled individuals or families. However, for all other families, you will face a maximum limit on the number of years you can receive assistance. If your initial mortgage is for 20 years or more, you can receive assistance for a maximum of 15 years. If your mortgage is for less than 20 years, you will receive a maximum of 10 years of assistance.

Affordability Requirements

The Homeownership Voucher Program has strict affordability requirements for any PHA housing. If you qualify for PHA housing, then your total estimated monthly payment for housing, which includes your mortgage principal and interest, your insurance, your real estate taxes, all of your utilities, plus any maintenance or other recurring homeownership costs, cannot exceed 35 percent of your adjusted gross income (AGI) and any subsidy that will be available for such payments.

If you purchase a home through your local PHA, it must be your primary place of residence, and you will be required to contribute at least 1 percent of the total purchase price for the down payment. Local PHAs are able to set their own additional parameters for purchases, which could include employment requirements, a clean criminal record, your participation in specified homeownership counseling or educational programs and more.

You will be required to pay the total tenant payment, which is equivalent to approximately 30 percent of your monthly income. Your Housing Assistance Payment (HAP) will then contribute to your additional monthly bills and expenses for homeownership. When looking to buy a home, however, remember that any monthly expenses above what is covered between your 30 percent payment and the HAP subsidy is to be paid by you and your family. That is where the PHA affordability requirements are applied, to ensure that you do not end up with payments exceeding your financial capacity.

Typical Loans for First-Time Homebuyers

The following are typical loans often offered to first-time homebuyers:

  • FHA Loans: The FHA (Federal Housing Administration) offers loans for first-time buyers with rates as low as 3.5 percent for a down payment. There are usually no prepayment penalties if you are able to pay your mortgage off early.
  • 30-Year Fixed Loans: This is a standard type of loan that can include just a 3 percent down payment, and the rate will not change for the full 30-year life of the loan. There are usually no prepayment penalties if you are able to pay your mortgage off early.
  • VA Loans: Veterans and active military personnel can receive a VA loan with no down payment, no Private Mortgage Insurance (PMI) and very flexible credit eligibility requirements.

Typically, if you cannot put a minimum of 20 percent into your down payment, you will be required to pay a monthly PMI fee with your mortgage payment. PMI can add a substantial amount to your monthly payment, so it is important you understand your financial obligations as a first-time homebuyer. Paying PMI is common since a down payment of 20 percent often exceeds the financial abilities of most home buyers.

Other Fees for Homeowners

Beyond paying your monthly mortgage and PMI (if applicable), you will also have to pay property taxes and homeowner’s insurance fees, both of which can vary widely. Homeowners insurance covers you for any unexpected losses due to factors like fire or burglary. You can often get an estimated homeowner’s insurance quote online, so visit several insurance providers to find your best quote.

To get an estimate for your potential property taxes, you can ask a real estate agent or the county tax assessor based on the area you want to buy your property. Some states also offer an online property tax calculator. Reach out to your local PHA for extra assistance with these estimations.

When you actually purchase a new home, you will also face closing costs (also called settlement costs), which can include title fees, appraisal fees, attorney’s fees, surveying fees, credit report fees, recording fees, inspection costs and taxes. You should be informed ahead of time about what your closing costs will entail so there are no surprises at the end of the deal.

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