First-Time Home Buyer Grants
- Jun. 27, 2018
- Taylir Paynter
- Personal Finance
How to Get a First-Time Home Buyer Grant
If you've been seriously shopping for a home, then you no doubt have some idea about the house and neighborhood you can afford and the money you want to put toward a down payment to keep your monthly payments manageable.
And it's likely that during your search you've allowed a few compromises to creep into your thinking to make your homeownership dream come true, perhaps persuading yourself that adding 15 minutes to your commute in exchange for a bigger house wouldn't be the end of the world.
But before you nail down your home-shopping budget, don't forget to explore housing assistance delivered in the form of a grant. Unlike a loan, a grant is money that acts as a subsidy to the recipient assuming certain obligations outlined by the Grantor are met by the recipient. A grant can be used for a down payment, to offset your loan's closing costs, or even buy that larger house with the extra bathroom you really want.
Sounds great, now show me the money, you say!
The good news is, first-time home buyer grants are out there. The bad news is, they're not always easy to find.
Use the following grant information to guide and assist you as you proceed down the home buying trail.
Where to Find First-Time Home Ownership Grants
Who's Got the Money?
The federal government, states, cities, private companies, and nonprofits believe that communities are strengthened through lasting and responsible homeownership. As such, they support and sponsor programs, including grants, to make homeownership more affordable.
As for who gets the money, it's a fairly large tent covering all walks of life – first-time homebuyers, veterans, the elderly, single-moms, farmworkers, first-responders, teachers, people with disabilities, individuals and families who are experiencing homelessness, to name but a few. Indeed, if you're drawing breath, and you're not collecting seven figures in income, you may qualify for some kind of housing assistance grant. The point is, even if you don't think you'll qualify, you may, so don't give up hope or become discouraged that help is only for the destitute.
Where Should You Start Looking?
The easiest place to start would be with your local mortgage lender. Ask if they know of any housing grants or down payment assistance programs. They may offer a lender buydown program, for example, where they may pay a portion of your interest for the first year or two of your loan. This results in benefits that are similar to a grant in that it helps you to buy your home. If they don't know what you're talking about, move on until you find someone who does.
Also, contact the city where you would like to live. Most cities have housing departments that run affordable/fair housing programs, often supported by federal and state funding. These same cities may have designated special assistance for areas of the city they're seeking to rehabilitate.
For example, many cities receive Community Development Block Grants (CDBG), administered by the Department of Housing and Urban Development (HUD). In turn, cities receiving these grants disperse them through various programs and agencies to address a wide range of unique community development needs, which, of course, includes housing. HUD determines the amount of each CDBG grant by using a formula that weighs a wide range of unique community development needs.
Expand your search, as well, to include housing programs supported by your state. For instance, the California Housing Finance Agency provides a list of CalHFA-approved lenders that first-time buyers can contact to apply for a loan grant. In Texas, a similar agency, known as the Texas Department of Housing and Community Affairs (TDHCA), administers a variety of programs under such titles as the HOMEbuyer Assistance Program, Texas Bootstrap Loan Program, My First Texas Home and Texas Mortgage Credit Certificate Program.
More Specific Home Buyer Grants
The USDA's Rural Housing Repair Loans and Grants program provides loans and grants to very low-income homeowners (below 50 percent of the area median income) to repair, improve, modernize, or to remove health and safety hazards in their rural dwellings. Some USDA loans can be repaid over 20 years at a fixed 1 percent interest rate. Grants of up to $7,500 may be arranged for recipients who are 62 years of age or older and can be used only to pay for repairs and improvements to remove health and safety hazards. Loan/grant combinations may be arranged for applicants who can repay part of the cost. Go to https://www.usda.gov/topics/rural/housing-assistance for more information.
--Mortgage Credit Certificate
Many states have their own version of the MCC, which basically provides you a dollar for dollar deduction off your federal income taxes, up to $2,000. If you don't owe any federal taxes, however, the deduction won't do you any good. By reducing your potential federal income tax liability, you may have more net spendable income to apply toward your monthly mortgage payment. Be sure to consult your tax advisor.
Go to https://www.ncsha.org/resource/mortgage-credit-certificate-program-qa/ for more information.
--Good Neighbor Next Door
The Good Neighbor Next Door program, sponsored by the Department of Housing and Development, provides housing aid for law enforcement officers, firefighters, emergency medical technicians and pre-kindergarten through 12th-grade teachers.
Through this program, you can receive a discount of 50 percent on a home's listed price in regions known as “revitalization areas.” Paying less than full price for a property is another form of a grant. You're being granted a sizable price reduction that you don't have to pay back.
Use the program's website to search for properties available in your state. You must commit to living in the home for at least three years. Go to https://www.hud.gov/program_offices/housing/sfh/reo/goodn/gnndabot for more information.
--Veterans Administration Housing Grants for Disabled Veterans
The VA provides grants to U.S. servicemembers and veterans with certain permanent and total service-connected disabilities to help purchase or construct an adapted home, or modify an existing home to accommodate a disability.
Two grant programs exist: The Specially Adapted Housing (SAH) grant and the Special Housing Adaptation (SHA) grant. The maximum amount available to adapt a family member's home for the SAH grant is $35,593 and for the SHA grant is $6,355. For more information, go to https://www.benefits.va.gov/homeloans/adaptedhousing.asp
Finding the Right Home Buyer Grants
The above list is by no means complete; rather, it's a start. New assistance programs are forming all the time while others have expired or run their course after meeting a short-term need.
At the same time, while conducting your search for assistance, keep your guard up for websites or for-profit companies that promise to help you find any kind of funding you need for “a small fee.” Many of these organizations have names that imply an association or direct relationship with the U.S. government, when there's no connection whatsoever. So, steer clear!
Again, your best route for seeking and finding grants to further your housing quest is to first work with professionals who have their feet firmly embedded on the ground in the areas where you want to live. Start with your local lender or your city's housing department. They should be knowledgeable about the current housing assistance programs for which you may be eligible.
Be persistent. While it's true there are no free lunches, sometimes there is assistance with no obligation to pay back assuming certain requirements are met for those diligent and determined enough to go looking for it.
Be sure to check our resources on which first time home buyer program(s) are available in your area.