Are You Ready to Buy?
✅ You Should Be Ready If You Have:
- Stable employment for 2+ years
- Credit score of 580+ (620+ for better rates)
- Down payment saved (3.5% minimum for FHA)
- Emergency fund for closing costs
- Debt-to-income ratio under 43%
- Plan to stay in area for 5+ years
- Understanding of homeownership costs
⚠️ Consider Waiting If You:
- Change jobs frequently
- Have significant debt to pay off
- Haven't saved for down payment
- Credit score below 580
- Expecting major life changes
- Unsure about long-term location
- Prefer flexibility of renting
Special Programs for First-Time Buyers
FHA Loans
Key Benefits:
- Low down payment: Just 3.5%
- Lower credit scores: 580 minimum
- Gift funds allowed: From family/employers
- Assumable loans: Transferable to buyers
Requirements:
- Primary residence only
- Mortgage insurance required
- Loan limits by county (up to $766,550 in 2024)
- Property must meet FHA standards
2024 Loan Limits: Check HUD.gov for your area's limits. High-cost areas
can go up to $1,149,825.
VA Loans
Key Benefits:
- No down payment: 0% down required
- No PMI: No private mortgage insurance
- Competitive rates: Often below market
- Reusable benefit: Can use multiple times
Eligibility:
- Veterans with honorable discharge
- Active duty service members (90+ days)
- National Guard/Reserves (6+ years)
- Surviving spouses (certain conditions)
VA Funding Fee: 2.15% for first-time use (can be financed). Disabled
veterans are exempt.
USDA Rural Loans
Key Benefits:
- No down payment: 100% financing
- Low rates: Below market interest rates
- Low fees: Minimal guarantee fee
- Repair grants: Available for improvements
Requirements:
- Property in USDA-eligible rural area
- Income limits (typically 115% of median)
- Primary residence only
- US citizenship or permanent residency
Eligible Areas: Use USDA's eligibility map. Covers about 97% of US land
area and 32% of population.
Conventional First-Time Buyer
Programs Available:
- HomeReady (Fannie Mae): 3% down
- Home Possible (Freddie Mac): 3% down
- Conventional 97: 3% down payment
- Good Neighbor Next Door: HUD employee discount
Benefits:
- PMI can be removed when 20% equity reached
- No upfront mortgage insurance premium
- Higher loan limits than FHA
- Investment properties allowed (higher down payment)
Credit Requirements: Typically need 620+ credit score and
debt-to-income under 43%.
Down Payment Assistance Programs
Over 2,000 down payment assistance programs exist nationwide, offering grants, loans, and tax credits to help with down payments and closing costs.
Types of Assistance:
🎁 Grants (Free Money)
- Don't need to be repaid
- Often for specific professions (teachers, police, firefighters)
- Income and location restrictions apply
🏦 Second Mortgages
- Low or 0% interest loans
- Deferred payment until sale/refinance
- Forgivable after certain years
💰 Tax Credits
- Mortgage Credit Certificate (MCC)
- Reduces federal taxes owed
- Typically 10-50% of mortgage interest
🏠 Employer Programs
- Many large employers offer assistance
- Hospitals, universities, corporations
- Can be grants, loans, or matches
How to Find Programs:
- State Housing Finance Agency: Every state has programs
- Local Housing Authorities: City and county programs
- DownPaymentResource.com: National database
- Lenders: Many banks know local programs
- Real estate agents: Local market knowledge
- Housing counselors: HUD-approved counselors
Popular State Programs
California CalHFA
Up to 3.5% down payment assistance loan
Texas TSAHC
Up to 5% down payment assistance
Florida SHIP
Varies by county, up to $25,000
New York SONYMA
Below-market rates + closing cost assistance
Pro Tip: These programs often combine with FHA, VA, or USDA
loans for maximum benefit.
Step-by-Step Home Buying Process
Costs to Budget For
Upfront Costs
| Cost Category | Typical Range | Who Pays |
|---|---|---|
| Down Payment | 0-20% of home price | Buyer |
| Closing Costs | 2-5% of home price | Buyer (negotiable) |
| Home Inspection | $300-$600 | Buyer |
| Appraisal | $400-$800 | Buyer |
| Title Insurance | 0.5-1% of home price | Varies by state |
| Earnest Money | 1-3% of home price | Buyer (credited at closing) |
Ongoing Monthly Costs
- Principal & Interest: Based on loan amount and rate
- Property Taxes: 0.3-2.5% of home value annually
- Homeowner's Insurance: $500-$3,000+ annually
- PMI/MIP: 0.15-2.25% of loan amount annually
- HOA Fees: $50-$500+ monthly (if applicable)
- Utilities: Electric, gas, water, internet, etc.
- Maintenance: 1-3% of home value annually
Money-Saving Tips
- Shop lenders: Rates and fees vary significantly
- Negotiate seller concessions: Ask seller to pay closing costs
- Time your closing: End of month can save interest
- Skip unnecessary services: Don't pay for extras you don't need
- Get multiple quotes: Insurance, inspections, title
- Take advantage of tax benefits: Mortgage interest deduction
Red Flags to Avoid
- Pressure to buy immediately
- Agents who won't show homes in your budget
- Lenders who won't explain fees
- Homes with major foundation issues
- Neighborhoods with declining values
- Monthly payments over 28% of income
First-Time Buyer Education
Many lenders and assistance programs require completion of a homebuyer education course. Even if not required, these courses provide valuable information and may qualify you for additional benefits.
Course Benefits:
- Reduced interest rates (up to 0.5% with some lenders)
- Lower down payment requirements
- Reduced mortgage insurance premiums
- Access to special loan programs
- Closing cost assistance
- Better understanding of home buying process
Approved Course Providers:
HUD-Approved Agencies
- NeighborWorks America
- National Urban League
- Local housing counseling agencies
Online Courses
- eHome America
- Framework Homeownership
- Freddie Mac CreditSmart
Course Topics Covered:
- Budgeting and credit
- Loan products and options
- Home shopping process
- Making an offer
- Home inspections
- Closing process
- Homeownership responsibilities
- Avoiding foreclosure
Typical Cost: $50-$125
Duration: 6-8 hours (can be completed online)
Ready to Take the Next Step?
Get Counseling
Call HUD: 1-800-569-4287