Types of Home Buying Programs

If you dream of owning a home, there are programs to help your dreams of homeownership become a reality. Whether you're a disable veteran or nurse, teacher or police officer, natural disaster victim or rural homeowner, there are programs available to assist you. We're going to give you a rundown of the home buying programs available, and help you decide which is best for you.

National Home Buying Programs

Department of Housing and Urban Development

Looking for a program that is a government funded program aimed at supporting individuals in achieving the American dream of homeownership? Look no further than the Department of Housing and Urban Development. Also known as HUD, it has eleven programs to consider:

  1. Homeownership and Opportunity for People Everywhere: Also known as HOPE I, this program offers grants to low income families to purchase public housing units.
  2. Energy Efficient Mortgage Program: An Energy Efficient Mortgage (EEM) allows families to include the cost of energy saving measures, such as solar, into their mortgage. Borrowers are often able to qualify for larger loans and stretch their debt-to-income qualification ratios.
  3. Good Neighbor Next Door: HUD offers a discount on the sale price of the home to teachers, firefighters, law enforcement, and emergency medical technicians in exchange for living in the neighborhood for three years.
  4. Teacher Next Door: This program offers homes to teachers at a discounted rate with fewer fees and a low interest rate.
  5. Nurse Next Door: This program offers home buying assistance grants to medical professionals.
  6. Mortgage Insurance for Disaster Victims: The Federal Housing Administration (FHA) insures mortgages offered to victims of a major disaster who have lost their homes and are in the process of rebuilding or buying another home.
  7. Mortgage Insurance for One- to Four-Family Homes: The FHA insures mortgages used to finance the purchase of new or existing one to four family housing with limited fees.
  8. Mortgage Insurance Programs on Indian Reservations and Other Restricted Lands: This program offers up to 97% financing to tribal members who qualify.
  9. Self-Help Housing Property Disposition: This HUD program offers surplus housing at lower than market values to non-profits, as well as state and local entities.
  10. Single Family Property Disposition Program: Non-profit and government agencies may purchase homes at a discount from the FHA. These are one- to our-family properties that have been foreclosed on.
  11. The American Dream Downpayment Assistance Initiative: The HOME program offers assistance to low income families who are first-time home buyers.

United States Department of Agriculture and Rural Development

Are you looking to buy in a rural area or invest in a farm? The United States Department of Agriculture and Rural Development or USDA's mission is to enhance and develop both the economy and quality of life in rural America.

When it comes to housing, USDA has four programs to consider:

  1. Single Family Housing Direct Home Loans: This program is also known as the Section 502 Direct Loan Program, and it assists low income applicants to obtain decent, safe and sanitary housing in rural areas. The program offers payment assistance that reduces the mortgage payment for a short time.
  2. Single Family Housing Home Loan Guarantees: This program provides low- to moderate-income households with assistance in buying adequate, modest, decent, safe and sanitary dwellings as a primary residence in rural areas.
  3. Mutual Self-Help Housing Technical Assistance Grants: This program provides grants to non-profits and government agencies to help low income families to construct a home in rural areas.
  4. Rural Housing Site Loans: Section 523 loans are used to acquire and develop sites for housing constructed by the Self-Help method. Section 524 loans are made to acquire and develop sites for low- or moderate-income families, with no restriction as to the method of construction.

The Federal Housing Administration

The Federal Housing Administration (FHA) has a three home buying programs to consider:

  1. FHA Loan: These loans are meant to help people become homeowners with low down payments, low closing costs, and easier loan qualification.
  2. Limited 203(k) Mortgage: FHA's Limited 203(k) program helps home buyers and homeowners finance up to $35,000 into their mortgage to repair, improve, or upgrade their home.
  3. 203(k) Mortgage: Borrowers who qualify for an FHA loan may also be able to finance renovations and rehabilitation through this program.

Fannie Mae and Freddie Mac

Fannie Mae and Freddie Mac are two government sponsored enterprises (GSE) formed by congress. Although they are privately owned, they receive support from the government in the guidelines that they set for mortgages and borrowers. Fannie Mae and Freddie Mac have three programs to consider:

1. Conventional 97

Who does not like a little competition? The Conventional 97 was created as a direct rival for the FHA loan. Here are five key aspects of the program:

  • Homeownership: You must be a first time home buyer or not bought a home in the last three years.
  • Income: No limit.
  • Down Payment: 3%.
  • Loan Type: A fixed rate loan only.
  • PMI: PMI on the loan will automatically drop off when the mortgage has a 80% loan-to-value (LTV) ratio.

2. HomeReady

Not a first time buyer, but still want the benefits of a conventional loan with a low down payment option? The HomeReady program was made with you in mind. Here are seven key aspects of the program:

  • Homeownership: You do not need to be a first time home buyer.
  • Flexible: Do you live with family members or roommates? You can use their income to qualify along with your own income without the worry that they will be considered a borrower on the mortgage.
  • Income: There are income limits.
  • Down Payment: 3%.
  • Loan Type: A fixed rate loan only.
  • PMI: PMI on the the loan will automatically drop off when the mortgage has a 80% loan-to-value (LTV) ratio.
  • Class: In order to qualify for this program, participants are required to take a homeownership class.

3. Home Possible Advantage

Want the option of either a fixed mortgage or an adjustable rate mortgage while still having the benefits of a conventional loan with a low down payment option? The Home Possible Advantage was made with you in mind. Here are six key aspects of the program:

  • Homeownership: Repeat home buyers and first time home buyers welcome to apply.
  • Income: No limit as long as the home being bought is in an underserved community.
  • Down Payment: 3%.
  • Loan Type: A fixed rate loan or ARM loan.
  • PMI: PMI on the loan will automatically drop off when the mortgage has a 80% loan-to-value (LTV) ratio.
  • Class: In order to qualify for this program, participants are required to take a homeownership class.

Veteran's Administration Loan

The U.S. Department of Veteran Affairs, also known as the VA, offers Veteran's Administration loans for those who have served the nation. The Veteran's Administration has three programs to consider:

1. Purchase Loans

Here are five key aspects of the VA purchase loan program:

  • Eligibility: Check out eligibility requirements through the VA.
  • Homeownership: Repeat home buyers and first time home buyers welcome to apply.
  • Down Payment: No down payment needed.
  • Loan Type: A fixed rate loan or ARM loan.
  • PMI: No PMI required.

2. Adapted Housing Grants

This program is designed for service individuals with a service-related disability to help them build, remodel, or purchase an adapted home.

  • Eligibility: The Specially Adapted Housing (SAH) grant is available to certain Veterans and servicemembers who are entitled to disability compensation.
  • Specially Adapted Housing (SAH) Grant: Up to $73,768 for qualifying veterans to modify their home to meet their needs.
  • Special Housing Adaptation (SHA): Up to $14,754 to increase the veterans mobility within their home.
  • Temporary Residence Assistance (TRA): Temporary grant available to SAH/SHA eligible Veterans and servicemembers who are temporarily residing in a home owned by a family member.
  • HISA Grants: Home improvement benefits up to $6,800 may be provided to Veterans with service-connected disabilities.

3. Native American Direct Loan (NADL) Program

This program offers VA home loan guarantee benefit on Federal trust land to eligible Native American Veterans and their spouses.

  • Eligibility: You must obtain a Certificate of Eligibility.
  • Down Payment: No down payment.
  • Loan Type: A fixed rate 30-year mortgage.
  • PMI: None required.
  • Interest rate: 3.75%.

Local Home Buying Programs

In addition to the National housing programs, HUD offers a list of local home buying programs by state. You might search for programs offered through Housing and Community Development programs, housing finance agencies, the U.S. Department of Agriculture Rural Housing, or Habitat for Humanity. For example, the Connecticut Housing Authority offers a homeownership program for police officers. There are also many options available for teachers, nurses, and firefighters.

Many people also ask about home buying programs for single moms. Many of the national programs are available to single moms, but if you're a single mother hoping to qualify for a mortgage, your best option is to contact your local government to see if there are any local home buying programs that could help too.

Which Home Buying Program is Right For You?

When deciding which home buying program is right for you, it is important to consider four elements of each program requirements:

  1. Credit requirements;
  2. Down payment;
  3. Home location;
  4. Your occupation.

If you would like the benefits of a conventional loan where your PMI eventually drops off with similar low down payment options as an FHA loan, then one of the three Fannie Mae and Freddie Mac programs may be best for you.

If you are a law enforcement officer, teacher, firefighter, or emergency medical technician, one of the HUD programs may be a good fit. You may also want to look at the Everyday Hero Housing Assistance Fund.

If you don't mind living further from town, in rural areas, and like the idea of a 0% down payment, then one of the four options from the USDA may be best for you.

If you are looking for a government insured loan with a low 3.5% down payment, then an FHA loan may be best for you.

If you are a veteran, you can't beat VA loan benefits and should definitely utilize the opportunities offered through that assistance.

No matter which program you choose, LendingTree is here to help you on your path to homeownership.

More Information

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