States with the best homebuyer assistance programs
States with the best homebuyer assistance programs
Achieving the American dream has long been associated with owning a home. Yet for many of today’s would-be homebuyers, economic uncertainty has called that dream into question.
To help first-time homebuyers achieve the American dream, states from Maine to California have designed specific programs to help new homebuyers afford their first homes.
We combed through each state’s homebuying assistance programs that are specifically targeted at first-time buyers. The following slides are a sample of states that offer the top first-time homebuyer assistance programs.
In all states, a first-time homebuyer is defined as someone who has never owned a home or hasn’t been a homeowner in the last three years. All first-time homebuyer programs come with some form of restrictions; most common are income, purchase price, credit score and national citizenship.
Many homebuyer assistance programs are based on a first-come, first-served basis. State homebuying programs change all the time, so be sure to check with your home state to see which programs are still available when you’re ready to buy a home.
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New York has several first-time homebuyer programs which offer fixed-rate mortgage financing at competitive rates and down-payment assistance.
Remodel New York
Remodel New York allows first-time homebuyers to finance both the purchase and needed repairs of a home.
Achieving the Dream Program
This program targets low-income first-time buyers and provides loans with “very low” fixed rates and up to 97 percent financing on one- and two-family homes (condos, co-ops, and manufactured homes with a permanent foundation). Borrowers must contribute 1 percent of the property’s value (3 percent for co-ops).
Construction Incentive Program
This program provides up to 97 percent financing and a long rate-lock period for first-time buyers who purchase new or recently rehabbed homes.
Low Interest Rate Program
This down-payment-assistance program provides buyers with competitive fixed-rate mortgages at low interest rates. This program can be used to purchase one- to four-family properties.
Down Payment Assistance Loan
The DPAL provides down-payment assistance to first-timers via a second mortgage. A DPAL can be used in conjunction with any of the New York programs listed above. A DPAL has a 0 percent interest rate, no monthly payments, and is forgiven after 10 years as long as the buyer remains in the home.
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First-time buyers have access to 30-year fixed-rate mortgages at below-market interest rates. Buyers must contribute at least $1,000.
SmartStep Plus Program
The ”plus” program offers the same advantages as the standard program, but offers a low-interest rate, 30-year second mortgage to help buyers pay for their down payment and closing costs. To qualify for one or both SmartStep programs, buyers must contribute at least $1,000 toward the loan.
HomeOpener and HomeOpener Plus Programs
These programs are nearly the same as the SmartStep programs, except the purchase-price limits are waived.
Second Mortgage Loan Program
This program--used in conjunction with the two sets of ”plus” programs mentioned above—is designed to help buyers pay for their down payment and closing costs. This second mortgage is available for up to 3 percent of the first mortgage amount and at the same interest rate. If you refinance or transfer the loan, or if the home is no longer your principal residence, this second mortgage becomes due in full.
Mortgage Credit Certificates
Colorado’s MCC program aims to pick up where the federal homebuyer tax credit left off. It’s designed to save you cash each year you remain in your home. Colorado’s MCC program can be used in conjunction with a Colorado Housing Finance Agency first mortgage or with a first mortgage from an independent lender.
Colorado also has a first-time buyer program aimed at residents in public housing.
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Like many states, Tennessee offers first-time buyers a chance to qualify for a 30-year fixed-rate mortgage at competitive rates.
Great Rate Program
Currently, Tennessee is offering rates as low as 3.60 percent on 30-year mortgage loans under their Great Rate program. Closing costs can come from a variety of sources, including the borrower, seller or as a gift.
Great Advantage Program
While very similar to the Great Rate program, the advantage here is that in exchange for a slightly higher interest rate, borrowers receive 2 percent of the loan amount to cover the down payment and closing costs.
Great Start Program
While the interest rate on this loan is 4.20 percent, first-timers will receive 4 percent of the loan amount to cover the down payment and closing costs.
New Start Loan Program
This program encourages low-income first-timers to purchase newly constructed homes.
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First-time homebuyers in North Carolina are eligible for 30-year fixed-rate loans at competitive rates as well as down-payment assistance.
FirstHome Mortgage Program
North Carolina offers first-time buyers a 30-year fixed-rate mortgage with “interest rates that are below or competitive with market rates.” Down payments vary from 0 percent to 3.5 percent of the sales price. Some mortgage lenders may refer to this as a “MRB loan” (mortgage revenue bond loan).
Down Payment Assistance
North Carolina provides buyers with up to $8,000 in the form of an interest-free second mortgage to cover the down payment and closing costs. Borrowers are required to contribute $1,000. Unless you sell, transfer, refinance or default, payment on the principal isn’t due for 30 years.
Second Mortgage Program
If you’re in the market for a newly constructed home, you may qualify for a $25,000 second mortgage (max amount is $25,000 or 20 percent of the sales price, whichever is less). There is a $5,000 minimum for this assistance, which targets buyers who earn below the median income.
Mortgage Credit Certificates
A mortgage credit certificate helps first-time buyers in North Carolina take their mortgage interest deductions a step further. Qualifying buyers can claim 30 percent of their mortgage interest as a tax credit. An MCC can save you a few thousand dollars each year, money that can be put toward your mortgage balance. While an MCC can be used with many different mortgage products, FirstHome Mortgage borrowers cannot use an MCC in conjunction with their loan.
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Qualified first-time homebuyers in New Jersey can secure 30-year home loans at below-market interest rates with down payments as little as 3.5 percent. However, down payments must come from the borrower, who must have a total monthly debt-to-income ratio no greater than 38 percent.
Smart Start Program
This second-mortgage program provides down-payment assistance of up to 4 percent of the first mortgage amount. There is no interest rate on this second mortgage. Areas where a buyer may purchase a home are limited under this program.
Purchase/Rehab Mortgage Program
First-time buyers can receive low interest rates for loans that fund the purchase and repair of a home. Borrowers must meet FHA 203(K) requirements.
If you’re in need of immediate repairs, the Home Plus program allows first-time buyers to take advantage of low interest rates while rolling up to $15,000 worth of repairs into the first mortgage. Allowable improvements include: a new roof, painting, heating and cooling systems, kitchen, bath and room renovations, plumbing and electrical upgrades, energy efficient improvements, as well as handicapped accessibility improvements.
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Ohio offers qualifying first-time homebuyers below-market interest rates on 30-year fixed-rate loans.
Down Payment Assistance Grant
A grant from the state of Ohio provides first-time buyers with an amount that’s 2.5 percent of the purchase price to put toward their down payment and closing costs. Given the size of the grant, borrowers should expect to pay for some expenses out of their own pockets. Buyers who take advantage of this down-payment assistance will have a mortgage rate that’s 0.5 percent higher than the current rates offered by the Ohio Housing Finance Agency.
Grants for Grads Program
The grads program provides 2.5 percent of the home’s purchase price to assist with the down payment and closing costs in the form of a second mortgage. There is no interest rate and it’s forgivable after five years as long as the buyer remains in the home for that period. Buyers must have a high school degree or GED and some form of postgraduate degree within the last two years to qualify.
New Home Sweet Home Program
This Ohio program is designed for first-time buyers who purchase new homes. Buyers will receive an extended rate-lock period of up to 180 days while the construction is completed. In exchange for the extended lock period, the interest rates at the time of the lock will be 0.25 percent higher than current OHFA rates.
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Like most first-time buyer programs, FirstHome offers fixed-rate financing at attractive rates.
The HomeKey program is designed for low-income borrowers, offering an even lower interest rate than the FirstHome program. According to the North Dakota Housing Finance Agency website, “During the first year of the loan’s amortization period, qualified borrowers receive an interest rate that is approximately one percent below the standard FirstHome rate. The interest rate and monthly payments are stepped up twice during the next two years, holding constant for the remaining term of the mortgage.”
North Dakota describes this program as the “extra little boost” many first-time homebuyers need. While the interest rates are “slightly higher,” buyers receive a financial sum equal to 3 percent of the first mortgage. Buyers must contribute $500, and the Start Program cannot be used with any other down payment assistance.
Downpayment and Closing Cost Assistance Program
Another program designed to help first-timers meet “out-of-pocket cash requirements,” this down-payment assistance offers a zero interest, deferred-payment loan, which is either worth $3,000 or 3 percent of the purchase price (whichever is higher). Borrowers must pony up $500 to qualify. This program can be combined with the FirstHome and HomeKey programs.
If you’re a first-time buyer and are new to the state, the NDHFA offers a home loan with below-market rates as well as down-payment assistance.
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Montana offers first-time homebuyers 30-year fixed-rate mortgages at below-market interest rates. Down payment requirements range from 0 percent to 3.5 percent of the sales price.
First-time Homebuyer Savings Account Program
This unique program allows would-be first-time buyers to set up a savings account to help them prepare for the costs of homeownership. First-time buyers can deposit any amount they wish, and deposits can be made for up to 10 years or until a home is purchased. As long as the money remains in the account or is withdrawn to pay for first-time buyer expenses, it's not included as state taxable income.
This statewide effort provides buyers with a second mortgage loan to help pay for a down payment and closing costs. NeighborWorks provides down-payment assistance anywhere in Montana not covered by the state’s other programs. Borrowers will encounter asset limitations of $5,000 liquid cash and $70,000 in total family assets. Interest rates and terms vary by income.
Mortgage Credit Certificates
The MCCs in Montana have the same impact as those in other states. However, first-time buyers cannot use them in conjunction with a Montana First-time Homebuyer mortgage.
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Connecticut offers 30-year fixed-rate mortgages at below-market interest rates to qualified first-time buyers statewide. This loan may only be used to purchase a primary residence.
Downpayment Assistance Program
First-time buyers that fit the parameters for the Homebuyer Mortgage program can also qualify for down-payment assistance up to 25 percent of the purchase price. This assistance offers a “supplementary” loan at below-market interest rates for borrowers to come up with a significant down payment.
Homeowner's Equity Recovery Opportunity (HERO) Loan Program
The HERO Loan program is a neighborhood stabilization effort that encourages first-time buyers to purchase and fix up foreclosed, abandoned, deed-in-lieu, and short-sale properties.
Connecticut also has first-time homebuyer programs available for those currently in public and Section 8 housing, as well as other programs in specific parts of the state.
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Washington State’s primary mortgage program offers qualified borrowers 30-year fixed-rate loans at competitive rates.
Home Advantage Downpayment Assistance Program
This portion of the Home Advantage program offers buyers a 0 percent interest, 30-year second mortgage designed to help cover down-payment costs. You can borrow up to 4 percent of the total loan amount.
Mortgage Credit Certificates
Availability of MCCs is based offered on a first-come, first-served basis. Buyers can utilize the MCC program in conjunction with Washington’s Home Advantage program.
Washington State also offers their First Mortgage program to veterans, buyers with disabilities, teachers, community employees and to buyers in specific parts of the state.
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Tim Manni is the Managing Editor of HSH.com and the author of the site's daily blog, which concentrates on the latest developments in the mortgage and housing markets.