4 mortgage assistance programs a first-time home buyer should know
Buying a home for the first time in Washington or anywhere else for that matter can be a joyful and at the same time a daunting experience. Many in our millennial generation want to settle down, establish their reputation in society and live the American dream. While they face many hurdles when they hit the market looking for a home, first and foremost difficulty is to come up with a 20 percent down payment. The mere thought of arranging so much cash keeps them away from their dream of homeownership. Even though the average down payment for first-time buyers is 6-10 percent in most cases, coming up with a decent amount of cash when you’re first starting out can be tough.
Thankfully, the government offers a number of first time homebuyer programs to help you get on the housing ladder. Here are some of the most popular loan assistance programs you should check out if you qualify as a first-time home buyer.
Let’s first determine whether you qualify as a first-time home buyer
Most people think that a first-time home buyer is someone who has never owned a home. Well in most cases, it’s a misconception. You can qualify as a first-time home buyer for most government-sponsored loan assistance programs even if:
- You or your spouse has not owned a home in the last three years.
- You have recently divorced. Your previous home was owned jointly with a spouse.
Some programs put limitations on eligibility on the basis of your income, property type (if it is a luxury home) and the purpose of buying (If you are buying for investment purposes such as a rental, you may not qualify).
Federal housing administration (FHA) loans
You will feel a bit more confident to know that you can buy a home with just 3.5 percent down. FHA makes it possible. There is only one downside. You will have to insure the mortgage with private mortgage insurance (PMI). So you will pay PMI on top of your monthly installment.
In your case, PMI will not be tied to the equity your home builds. In other cases (when the down payment is less than 20 percent and the borrower is not first-time buyer), the borrower stops paying PMI when he or she builds 20 percent equity in home, but you will wind up paying insurance throughout the life of the loan.
Veterans Administration (VA) loans
You don’t have to be worried about down payment at all if you have served in the U.S. army. You will get 100% financing when buying your first home. The icing on the cake is that you won’t pay PMI. Spouses of those veterans who were martyred in the service also qualify for VA loans.
There are some requirements including a certain debt-to-income ratio criteria that you have to meet when applying for a VA loan.
The United States Department of Agriculture (USDA) loans
Buying in a rural or suburban area with a population of less than 35,000? Well you can surely qualify for a USDA loan with 100% financing. The only catch is that you should demonstrate your need for housing. There are some other limitations with regard to income. You must have an adjusted income at or below the local limit.
Down Payment Assistance (DPA) Programs by Washington State Housing Finance Commission (WSHFC)
These programs are available in conjunction with a WSHFC first mortgage program like Home Advantage or House Key Opportunity. These programs don’t offer a grant, so you will have to pay back. Usually, the repayment takes place when the home is no longer occupied by the borrower (property is sold or becomes a rental) or if the first mortgage is refinanced.
Make sure that you check the website of the government agency offering assistance and go through the guidelines and eligibility criteria before you apply for any of the above-motioned loans.