First-Time Home Buyer Benefits in 2024: Programs and Perks

Buying a home is an investment that can set you back financially, keeping you from taking on other life projects. According to reports, California has the highest median home price at $843,340. With such a high price, buying your first home can seem impossible.

However, don’t let this discourage you. There are ways to make owning a home a reality. One practical solution is securing a loan, which can be a gateway to purchasing your dream home. For first-time homebuyers, there are specialized programs that offer first time home buyer benefits to minimize the costs of the loan you’ll need during the purchase.

In this blog, we’ll explore the several programs and perks you’ll have access to when you buy your first home.

What Are the First Time Home Buyer Benefits?

If you’ve never bought a home, haven’t owned one in the past three years, or have only ever owned one with a spouse, you can buy a home as a ‘first-time buyer’ in the USA. As a first-time buyer, you have access to the following perks:

• Low Down Payment

Usually, a down payment on a conventional loan is around 20% since you can avoid private mortgage insurance. However, most government-sponsored first-time homeowner loans come with a down payment as low as 3%. Moreover, some lenders will accept an even lower percentage.

• Down Payment Assistance

One of the benefits of a first time home buyer is the down payment assistance you’ll receive. After all, the biggest hurdle in purchasing a house with a loan is the down payment. So, the following assistance programs help you lower the amount you need to pay:

• Grants: A grant is a lump sum you can receive to pay off the totality or a part of your down payment. Plus, since it’s a grant, you don’t need to repay it. An example of such assistance is the Alabama down payment program, which offers $10,000 or 4% of the down payment.
• Deferred Loans: You can acquire a second mortgage on your home to help pay the down payment. With this type of loan, you won’t have to pay it unless you move, sell your property, or refinance your loan.
• Forgivable Loans: When you acquire a forgivable loan, you only have to pay it for a certain period before the financial institution forgives it. However, you must repay it if you resell your home, live in a different house, or refinance your loan.
• Employment DPA: Another benefit of being a first time home buyer is that you can use your job position to reduce your down payment. For example, Good Neighbor Next Door helps those in a variety of employment, such as teachers and police officers.
• Veterans DPA: The USA has a variety of veterans down payment assistance (DPA) programs that help veterans that fit other criteria, such as serving the army for a certain period. For instance, there’s the Delaware Diamonds which offer up to $10,000 to pay your down payment.
• Disability DPA: If you or your family members have a disability, you may meet the requirements for disability down payment assistance programs. One such program is the Choice Assistance, which offers $12,500.

• Closing Cost Assistance

Another benefit for first time home buyers is the assistance you can receive during the closing process. To find these assistance programs, you need to research the ones in your local area since every state has its own programs. Alternatively, you can search for them based on your profession, disability, or minority identity. For instance, the Delaware Diamonds program mentioned above offers $10,000 for closing costs, too.

• Reduced PMI Cost

When you receive a loan to buy a home, you might have to pay private mortgage insurance (PMI). This insurance protects the financial institution if you default on your loan. In particular, you’re more likely to have to pay insurance when you’ve paid a low down payment.

However, first home buyer benefits help you avoid these payments. More precisely, conventional conforming loans have lower insurance rates even with lower down payments. Plus, when you have less than 80% of your home’s value to repay, you can stop paying this insurance.

• Tax Credit

One of the first time home buyer perks is the federal tax credit. More precisely, the mortgage credit certificate allows you to reduce your taxes depending on the state in which you reside. Usually, this amount is 20% – 40% of your loan interest and can reach a maximum of $2,000 in a year.

• Credit Score Flexibility

Government-sponsored loans allow first-time homeowners to purchase a home with a lower credit score. For instance, Federal Housing Administration loans have a lower limit of 500 credit scores. In comparison, when you buy a home using a jumbo loan, you’ll likely need a high credit score of 700 or above.

However, even if the Federal Housing Administration requires a credit score of 500, financial institutions that give out this loan often require a higher score. Nevertheless, if your credit score is above 579, you’ll have access to the added first-time home buyer benefit of a down payment below 10%.

• Homebuyer Education

Before you can purchase your first home with a government-sponsored loan, you might have to take courses on loans and finances provided by your state or local government. This educational course is one of the first time home buyer advantages since it gives you the knowledge to make sound decisions about your purchase and how to leverage your loan best.

Conclusion

Purchasing a home is a large investment, but the perks and programs can help you manage the cost. From grants to additional loans, you can receive funds to reduce your down payment and closing costs. Moreover, there are multiple assistance programs that target specific employment positions, service members, and those with disabilities.

As for the first time home buyer benefits, you’re guaranteed access to lower down payments, reduced insurance, and tax credits. Plus, you have access to governmental educational resources that will teach you about the process of buying a home with a loan.