Buying a home is still the American dream. Unfortunately, student debt can make saving up for a down payment and securing a loan feel impossible. It doesn’t have to be though. The federal government and related organizations offer several first time home buyer federal grants that make becoming a first time home buyer an affordable reality.
HomePath Ready Buyer Program
Fannie Mae’s HomePath Ready Buyer Program is great for first time home buyers. You can receive up to 3% closing cost assistance in exchange for completing a four- to six-hour-long buyer education course. This course meets HUD guidelines and meets the homeownership education requirement if you go with a Fannie Mae HomeReady mortgage loan.
The general eligibility requirements for the program include:
- You must pay for ($75) and successfully complete the online HomePath Ready Buyer Course
- You must be a first-time home buyer (did not own a home in the past three years)
- You must live in the property as your primary residence within 60 days of closing
- The property you select must be eligible for closing cost assistance
View the terms and conditions of the program for more specifics.
Home Buying Process
The home buying process through the HomePath Ready Buyer program works like this:
- Successfully complete the required HomePath Ready Buyer Course
- Select an eligible property from HomePath.com
- Have your realtor submit the completion certificate with the initial offer
- Receive up to 3% of closing cost assistance. (On a $125,000 home, that’s $3,750 in assistance)
The 3% assistance can be used for closing costs, prepaid expenses, points, and the home buyer education course fee reimbursement.
Things to Think About
The big caveat with this program is that you’ll have to purchase an eligible property listed on Homepath.com. Foreclosed properties typically require a lot of work. Consider how much time and money you’re willing to spend on your home before making any decisions. Read more about Fannie Mae properties here.
HFA Preferred Incentive Program on HomePath Properties
Fannie Mae’s HFA Preferred incentive program provides eligible buyers with up to 3% closing cost assistance when they buy a HomePath home using an HFA Preferred conventional loan. You’ll need to apply for the loan separately through your state housing finance agency (HFA).
To be eligible, home buyers must:
- Buy and use the property as their primary residence
- Receive an HFA Preferred mortgage through a state HFA home-buyer program
- Purchase an eligible HomePath property
Home Buying Process
Buying a home through the HFA Preferred Incentive Program works like this:
- Get approved for an HFA Preferred mortgage through your state’s HFA home-buyer program
- Decide which HomePath home you’d like to buy
- Have your realtor request the HFA HomePath Incentive with the initial offer
- Receive up to 3% of closing cost assistance
Things to Think About
Participating in this program severely limits your purchase options. You must buy an eligible HomePath.com home, all of which are foreclosed. Foreclosed homes often require a lot of work. Factor in the time and money it would take to update the home to your liking before making any decisions. Read more about Fannie Mae properties here.
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Housing Choice Voucher (HCV) Homeownership Program
Families that currently receive assistance from the Housing Choice Voucher program might be eligible for the HCV Homeownership Program. Under this program, families can secure their own funds to purchase a home and then receive a monthly homeownership voucher.
To apply to the program, you must:
- Be a first-time homeowner (did not own a home in the past three years)
- Be receiving assistance under the HCV program
- Meet income and employment* requirements (at least one adult working full-time)
- Meet additional requirements laid out by your local Public Housing Agency (PHA)
You also need to meet extensive homeowner obligations to continue in the homeownership voucher program after being accepted.
*Employment requirement doesn’t apply to disabled families or the elderly
Home Buying Process
Before doing anything else, approved applicants must attend homeownership counseling sessions. Then, families must find a residence to purchase and have it approved by the PHA. The PHA typically sets affordability limits, preventing families from purchasing homes they cannot afford. Families must secure financing themselves, but the financing could be in the form of another grant or homeownership assistance program.
If your mortgage term is 20 years or longer, you can receive homeownership assistance for up to 15 years. If it’s shorter than 20 years, you can only receive assistance for 10 years. These limits do not apply if the head of household is elderly or disabled.
Things to Think About
Not every Public Housing Agency (PHA) offers the HCV homeownership program. You’ll need to find a PHA that offers the program in your area if you’re interested. Availability is limited.
HUD Good Neighbor Next Door (GNND) Program
Although not technically just for first-time home buyers, the Good Neighbor Next Door program from the Department of Housing and Urban Development (HUD) is only available to those who have not owned a home within the last year. The program offers eligible professionals 50% off the purchase of a home.
The program incentivizes people from select occupations to live in revitalization areas. You can’t buy any home though. You must purchase an Eligible Single Family home advertised through HUD’s website. The goal of the program is to bring “good neighbors” into these communities who can help with revitalization efforts.
To qualify, you must be working full-time as a:
- Law enforcement officer
- Emergency medical technician (EMT)
- Teacher (private and public K-12)
Home Buying Process
If you purchase a home through the program, you’ll receive your home at a 50% discount. In exchange, you must use the home as your sole residence for a minimum of 36 months. You’re responsible for securing a mortgage for half of the list price and then signing a second mortgage for the remainder. No payments are due on the second mortgage unless you move out of the house before the three years are up. When the three years are up, you can keep living in the home or sell it and keep any profits.
Things to Think About
Eligible homes are typically located in areas that others don’t want to live in. They’re sold “as-is” and might not be in the best shape. Carefully consider the location and the amount of time or money it would take to renovate the home before you decide.
Think you’re eligible for GNND? Find to a realtor and start looking at the homes listed on the HUD website. Homes stay posted for around a week with new homes being added every week. Check out the GNND FAQ page for more information.
VA Home Purchase Loans
Although not technically a first-time home buyer federal grant, the Veterans Administration’s loan program does help vets purchase a home at a lower up-front cost. It doesn’t matter if you’re a first-time home buyer or not. Under this program, vets can buy a home without a down payment. You don’t have to purchase mortgage insurance either. Instead, the VA guarantees part of your loan.
Eligible parties for the VA loan program include:
- Current or former National Guard or Reserve members
- Active duty servicemembers
- Discharged members of the National Guard
- Discharged members of the Selected Reserve
- Surviving spouses
Your length of service and time of service affect eligibility too. Visit the VA Home Loans eligibility page to review all eligibility requirements.
Home Buying Process
The VA loan buying process works like this:
- Find a lender that participates in the VA program and get “pre-qualified.” Shop around to find a rate and terms that you’re satisfied with.
- Obtain a Certificate of Eligibility. This verifies to the lender that you are eligible for the VA loan.
- Find a home and sign a purchase agreement.
- Apply for the VA loan
- Lender orders a VA appraisal and decides whether to grant you the loan.
- The sale closes and you’re ready to move into your new home.
Bottom Line: First Time Home Buyer Grants
First time home buyer grants and programs make buying a house with student loans possible. Of course, a grant or cash assistance is only part of the process. Buying a home is still a huge decision with big financial consequences. Set yourself up for a successful homebuying experience by following these tips:
- Improve your credit score prior to applying for a mortgage
- Reduce your debt expenses by paying off and/or refinancing student loans, auto loans, or credit card payments
- Start a second job or request a pay increase to boost your income
- Figure out when you’d like to buy a home and then start putting aside money each month for the down payment
If you don’t qualify for any of the first time home buyer federal grants or programs, don’t fret. State and local governments/agencies offer a number of first time home buyer grants and assistance programs too. The programs vary based on where you live but could include down payment assistance, closing cost assistance, and loans with low or zero interest rates
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Student Debt Relief Loan Refinancing Advertiser Disclosure
“College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. (1)College Ave Refi Education loans are not currently available to residents of Maine. (2)The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation. (3)$5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. (4)This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 12/14/2020. Variable interest rates may increase after consummation.”
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.