Buying a house can be a scary experience. The purchase will probably be the largest financial commitment you will ever make in your life. The traditional way is to go to your bank and ask for a loan that you will pay back over 15 to 30 years. The problem is that most banks are fairly stingy with their lending today. One solution for this dilemma is to purchase your dream home with some help from a program that encourages home ownership.
Explore U.S. Government-backed home buying programs. As a first-time buyer, you may have access to a Federal Housing Administration (FHA) program offering loans for a down payment of 3.5 percent of the purchase price and letting you finance most closing costs and fees. FHA also has loan programs for teachers and public safety employees, people buying homes in need of repair, and more. The Department of Agriculture has a program that allows persons living under certain income levels the ability to purchase or build a home in many rural areas. The Department of Veteran Affairs offers a home loan guaranty program for U.S. military veterans and their spouses that does not require a down payment.
Explore local-level home buying programs. Most states and large cities have programs offering loans and grants to purchase homes in areas they want to see revitalized.
Access a downpayment assistance program. These programs exist to help potential home buyers get over the hump of the making the original down payment on a purchase. Talk to your lender to see if you qualify for one of these programs.
Consider a community land trust property. Land trusts are non-profit organizations that manage property in areas they want to see protected or revitalized. They sell homes to people who share their goal of keeping the property in good condition. You can buy one of these properties at a lower rate because you are only buying the house, not the land. When you decide to sell, there will be limits on your profit and to whom you can sell.
Consider assistance from a close family member. There is nothing wrong in asking a relative for help with a down payment or closing costs. Most lenders allow relatives to help out as long as you can document it as a monetary gift, not a loan.
Local religious organizations may have programs available for members to help purchase homes or pay home buying fees.
Always check the neighborhood histories, crime rates, tax rates and school options before you buy.
The terms of government-backed loans and guarantees may be different than private sector loans, and there may be recapture fees when you sell. Always get the full details of these types of loans before signing on the dotted line.
- BYU Marriott School, Personal Finance “The Home Decision”
- Forbes, "The Real Reason for Banks Not Lending"
- HUD.gov, "Let FHA Loans Help You"
- HUD.gov, "Good Neighbor Next Door Program"
- USDA Rural Development Single Family Housing Guaranteed Loan Program
- U.S. Department of Veterans Affairs, "Purchase and Cash-Out Refinance Home Loans"
- HUD.gov, "Local Homebuying Programs"
- HUD.gov, "American Dream Downpayment Initiative"
- National Community Land Trust Network, "What Are Community Land Trusts? "
- The New York Times, Mortgages, "To Givers of Down Payments"
- U.S. Department of Housing and Urban Development, "Buying a Home"
- U.S. Department of Housing and Urban Development Local Home Buying Program reference page
- U.S. Department of Agriculture Housing Loans and Grants information page
- U.S. Department of Veterans Affairs Home Loan Guaranty information page
- U.S. Department of Housing and Urban Development information page about down payment assistance programs
- Directory of Community Land Trust programs
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