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How to Apply for Government Assistance When Buying Your First Home

When we think of the American dream one of the first things many of us think of is buying a home. If you are ready to take that step, congratulations! Buying a home is one of the most important steps in a person’s life and can make a huge difference in your family’s financial life.

Luckily, the U.S. government has a wide variety of programs that can help make this process easier. Keep reading to learn about the most popular government assistance programs.

How Can The Government Help Me Buy a Home? 

Depending on the program you select, the application process varies. In most cases, you have to provide proof of income at a certain pre-established level. You can apply for some programs at the same time that you fill out your mortgage application, while you can only apply to others once you have a mortgage.  

We recommend researching how to apply for these government financial assistance programs once you find one that you’re eligible for. To help you with this search, we’ll provide you with a list of the most common programs and their main characteristics.

Types of Assistance For Buying Your First Home

The following are the main government programs that you might be eligible for. Each of them are focused on different sectors of the population and have different requirements. You’ll probably be eligible for more than one program. Some of them can’t be used together while others can, so it’s important that you research all of them and create a strategy to apply for the programs that suit your needs.

USDA Loans

In addition to regulating the country's agricultural industry, the U.S. Department of Agriculture (USDA) also promotes rural area development. This department offers loans to people who live or want to live in rural areas.. Applicants have to prove that they are low-income, the exact income threshold depends on the area.

These loans are very convenient because they generally don’t require an initial payment or down payment, and they have interest rates that can be as low as 1%. If you’re thinking of buying a home in a rural area, we recommend contacting your local USDA office to explore your options. 

FHA loans

A Federal Housing Administration loan (FHA) is a mortgage backed by the government and issued by a bank or another lending institution approved by the administration. FHA loans require a lower initial payment than most conventional loans, and applicants can have lower credit scores than those that are generally required. 

FHA loans are designed to help low and middle-income families become homeowners. The requirements for getting this type of loan depend on the applicant’s circumstances, so we recommend finding a local bank or lender who works with the FHA to get more information about your eligibility and options.

VA loans

The Department of Veteran Affairs (VA) backs mortgages for active military members, veterans, and their surviving spouses. With this government guarantee, lenders can offer much lower down payments and interest rates than the ones that are normally offered on the market. The credit score requirements to obtain a VA-backed mortgage are less strict than those of regular mortgages. 

If you're an active military member, a veteran, or a spouse of a military member or veteran, we recommend that you read this pamphlet explaining program eligibility and its benefits. 

Fannie Mae and Freddie Mac

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Fannie Mae and Freddie Mac are private mortgage companies that are sponsored by the government (GSE). None of them provide direct loans to buyers, but you can apply for a mortgage backed by them at any authorized creditor. This type of mortgage is known as a “conventional loan.

The advantage of getting a mortgage backed by one of these companies is that when they issue you the loan, the lending bank faces a lower risk and can offer you lower interest rates and down payments. In order to apply for this type of mortgage, you’ll have to go to your local bank, check if their loans are backed by one of these institutions, and apply for the support by filling out this application.

“HomePath” from Fannie Mae

Since Fannie Mae backs a large number of mortgages, some of them fall into foreclosure, and the company takes possession of them. That's why they created the program HomePath. This program sells homes that have been foreclosed on at competitive prices through a mortgage backed by the company. 

In 2015, Fannie Mae launched a financial education program called Ready Buyer to help potential homebuyers educate themselves on the process of buying one of these foreclosed homes. This program costs $75 to enroll, but if you complete it and meet the requirements to buy a HomePath property, you can get up to 3% of your home’s value back to pay for the closing costs. You will also be reimbursed for the enrollment fee. 

Good Neighbor Next Door

Good Neighbor Next Door is a program offered by the United States Department of Housing and Urban Development. It allows public servants to buy qualified homes with discounts of up to 50%. A few eligible professions for this program are:

  • Police officers
  • Teachers
  • Firefighters
  • Emergency medical technicians (EMTs)

If you work in any of the jobs above, check out this site to find out more information about this assistance program. 

Energy Efficient Mortgage 

An Energy Efficient Mortgage (EEM) is a government grant to buy or refinance a home that meets certain energy efficiency requirements. It can also be used to improve a home so it's more energy efficient. Just like other types of mortgages, the home serves as your collateral. An EEM can be a conventional loan (without any support), be backed by the FHA, or it can be guaranteed by the V.A. so it can be combined with one of the options described above. 

To find out if your new home qualifies for one of these types of grants, ask your bank or mortgage lender about this option.

FHA Section 203(k) 

A FHA 203(k) loan— also known as rehab mortgage insurance, renovation insurance, or Section 203(k) loan— is an excellent option for people who are looking to buy a home that requires repairs. This type of government loan can be used to finance the home purchase as well as any modification or repairs necessary under one mortgage. This type of loan can even include rent payments for temporary housing while you make the repairs to your new home. 

HUD public housing programs

HUD homes are foreclosed properties that were originally bought using FHA loans. These residential properties are converted into HUD homes when an owner can’t keep up with their monthly mortgage payments and fail to hold up their end of the contract. In this case, the FHA intervenes, pays the lender for the remaining balance of the mortgage, and confiscates the property from the owner. 

In order to recover the cost, the government sells these homes, often under market value in order to attract potential buyers. While HUD homes pass an appraisal process, they’re sold “as is” and don’t make any repairs or improvements to the home before buying them. This means that someone who’s looking to buy a home and willing to make a few repairs to it can buy it at an attractive price. To look for this type of home, check out this site from the HUD.

State/local programs

The assistance options that we described above are available at a federal level. In other words, you can find them anywhere in the country. There are also local and state agencies and organizations that can help you buy a home. To find a list of programs available in your state, you can visit this site.

Some Things to Consider When Buying Your First Home

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Buying a home is one of the biggest life commitments that someone can make. That’s why it’s important to take the most important factors into account before taking this big step. 

Carefully evaluate what type of home you can afford

Before looking at properties, make sure you know how much you can pay. This doesn’t necessarily mean the biggest loan you can get. It means the most that you’re willing to pay each month. Mortgage payments and the costs associated with being a homeowner affect your monthly budget a lot more than paying monthly rental payments.

A good way to find out if you can pay a certain mortgage rate is to plan out your current budget and keep in mind that you’ll have to make mortgage payments instead of rental payments. Live with this budget for three months, and save the extra money for expenses that come with your new home. That way you’ll get a good feeling for how easy it can be to pay your mortgage.

Research the area you’re thinking about buying in

When it comes to buying property you can’t ever be too informed, so take some time to learn everything you can about the area that you might be buying a house in. Talk with different real estate agents and your mortgage broker to get a better idea of the local real estate market. Sites like Zillow or Trulia can help you compare prices in the area. You can also use these sites to locate services and amenities in this area. 

Take your time to evaluate potential property issues

Once you find a property that you're interested in, it’s important to check for any hidden defects or unpleasant surprises. Here are a few questions that you might ask yourself while you’re looking at the house:

  • Does the house have strange smells or smell like mold?
  • Are there any signs of pests in the home?
  • Do the toilets work correctly?
  • Does the HVAC system work well?
  • Is there enough water pressure?
  • Do the appliances work well?

Don’t be afraid to ask all the questions that you deem necessary to ensure that the home is in good condition.

Put your negotiation skills to work

As a buyer, you should have control over the transaction through solid negotiation. Remember that every dollar is valuable, and no real estate agent or seller will give you the best deal at the first, but if you stay firm in your offer and negotiate well, you can come to an agreement that will benefit you.

Don’t feel pressured

Remember that real estate agents are expert salespeople and work for the actual homeowner. In general, they’re interested in making a quick sale at the highest price possible. In order to achieve this, they can pressure you to make an offer. If you’re feeling rushed, remember that there are always more options. You’re less likely to have buyer’s remorse if you take your time to think objectively and appropriately.

Being a Homeowner is Within Reach!

Now that you’re familiar with the primary governmental assistance programs available to you and have a few tips in your arsenal, we recommend you keep researching your options to determine the best buying strategy for you.We hope you’ll find one that suits your needs. 

SABEResPODER is here to help. If you have any questions, feel free to contact us via chat using the chat function above, or write to us on our Facebook page.