7 Tips on Getting a Home Buyer Grant for Beginners

7 Tips on Getting a Home Buyer Grant for Beginners
June 29. 2021

You’ve decided to buy your first home. It’s a dream for millions of people. One that requires money but also knowledge about the homebuying process. Too often, people who want to purchase a home can’t afford to because of the required upfront costs. Sometimes the down payment and closing costs can equal 20% of the home’s selling price.

Limited funding is where a first-time home buyer program comes into play. These programs are designed to help people learn the homebuying and mortgage process. They are run by city and county municipalities and funded by the U.S. Department of Housing and Urban Development (HUD).

Are you planning to purchase your first home? Can you use help with the down payment? Keep reading to learn seven tips on getting a grant for your first home purchase.

1. Understand What a Home Buyer Grant Includes?

Going through a first-time homebuyer program has excellent benefits. The most significant benefit is the down payment assistance grant available to participants. The educational component is vital, as well.

Before you get to the grant money, you’ll learn the process of buying a home. Throughout the course, participants learn what a mortgage is and how to create a budget. Understanding your credit score and how to repair bad credit is another key feature.

You’ll also learn about the different types of mortgages and the requirements that come with each one, including down payments, minimum credit scores, and debt-to-credit rations:

  • FHA loans
  • Conventional loans
  • VA Loans
  • USDA loans

The overall goal is to ensure people who want to buy a home have all the necessary information and tools to begin the process.

2. Locate a Program Near You

To locate a first-time homebuyer program near you, start with your local government. City and county municipalities may not offer the program directly but are often involved. If they do not offer the plan directly, they can direct you to local non-profits that host the courses.

Check to see if there is more than one home buyer program in your area. You want to choose a program that fits your schedule. Some programs run on weeknights, while others are conducted on Saturday mornings.

Also, consider location. County-run programs may have locations further away from participants who reside within the city limits. Regardless of your location, the mortgage lender you’re working with can assist you with finding different types of grants. Mortgage Brokers are better for these grants as they have access to most programs.

3. Ask How Much Home Buyer Assistance You’ll Receive?

The down payment grant you’ll receive depends on the program. Various factors figure into the equation. Local government and corporate contributions to the program can also add to the total grant.

Make sure you understand the requirements of the program to get the down payment grant. Adhere to the program rules and take the online or at location classes. Whether there is a down payment grant or not, the first-time homebuyer programs have a lot to offer.

Someone in the course that’s never created a budget before will see the assistance differently from someone already on a budget. A person with poor credit will find information on rebuilding their credit more useful. A person not familiar with the mortgage process can leave with a different understanding of homeownership.

4. Read the Program Restrictions

Many homebuyer programs have restrictions and requirements. Although the program is geared towards first-time homebuyers, prior homeowners can still get a grant. There are provisions in some programs that are open to people who have not owned a home for three or more years.

The amount is often prorated over a specified number of years. If you sell your home early, the amount is prorated. The remaining balance is repaid from the proceeds of the sale.

Make sure HUD backs the program you choose. Some programs offer assistance in the form of a second mortgage and not a grant. A second mortgage could require repayment at some point.

5. Know Your Housing Options

First-time homebuyer programs could have stipulations on where you can purchase a home. The goal is to promote homeownership in low-tax-based neighborhoods.

Some programs also restrict the type of home you can purchase. These restrictions can include:

  • new home construction
  • planned communities
  • condominium
  • rehab properties
  • rent-to-own

Guidelines vary by state, and the information is outlined in the program packet. If you have questions, ask so that you’re not surprised when it’s time to go house shopping.

6. Gather Your Pay Stubs, Tax Returns, and Monthly Expenses

An essential part of the home buyer program is learning how to apply for a mortgage and budgeting. To get the most out of the program, take your financial records to record the exact amounts you’re paying out each month.

Having an unrealistic perception of your finances can lead to financial problems down the road.

You’ll also want to explore comparing home costs. After working on a budget, you may find a less expensive home is best.

7. Select a Real Estate Agent

Find a real estate agent familiar with home buyer grants and the area you want to reside.

The home buyer program may or may not help you get pre-approved for a mortgage. The realtor needs to work closely with the lender to understand your loan approval and better service you with the process, keeping everyone on the same page to achieve your home purchase.

Real estate agents are also a good source for the right home inspectors, insurance agents, and other professionals you’ll need.

Open the Door to Your New Home

Take advantage of the opportunities offered by a home buyer grant. It’s money that will help you open the door to your new home. Remember, the grant is forgivable as long as you live in your home for the required years and meet other requirements.

Want to learn more? Contact us at Market Place Mortgage for a free consultation.