There was a time in America when buying a home meant plunking down 20% of the purchase price. This was a lot easier in the 40s, when homes were cheaper compared to average income. Now that even an affordable home costs more than the average earner makes in three years, that 20% can be downright infeasible. Fortunately, there are plenty of options to make your American dream a reality, even if you haven’t been scrimping like a miser since you were in grade school.
The most popular go-to solution for would-be homebuyers is an FHA loan. The Federal Housing Administration can back your loan, promising to pay if you default. They’ll take people with shaky credit scores and specialize in helping out first-time homebuyers. You may be able to get your loan for as little as 3.5% down (of course, that can still be a chunk of change, but it beats the heck out of trying to put together 40 grand while you struggle with your student loans).
The FHA is helpful, but it’s not entirely free. You’ll have to carry mortgage insurance, which is a policy you take out that promises to pay your mortgage if you don’t. But since your mortgage will probably be less than the rent you pay now, you can likely afford it.
The Veterans Administration is not an option open to everyone, mostly because you have to be a veteran (it’s in the name). But if you or your spouse have served in the armed forces, the VA can help set you up with a zero-down loan. You’ll still have to save up a couple thousand for inspections and escrow and what-not, and the system is built to save money, not time. Not only that, but the VA is pretty picky about the home you buy. They won’t let you buy some run-down fixer-upper with a leaky roof and black mold, so don’t plan on picking up a foreclosure or investment property. This program is for veterans and surviving spouses who want to put their families in a home and raise their kids with a yard and a front porch.
No, I didn’t type that wrong. The U.S. Department of Agriculture will help you buy your first home, and you don’t even have to be a farmer. Their program is meant to improve the lives of people living in rural environments, so it may not be as much help if you’re trying to buy a brownstone in Brooklyn, but if you’re looking for a nice place in a small town, this might be just the thing. There are a few qualifications, though, most obviously location and income. USDA-issued loans are designed to help people who couldn’t afford a home and who really need one, and it could be a huge help if you’re in a tight spot.
A 203(k) loan is a special case, and it’s not even remotely easy to qualify for one. This is a home upgrade loan that helps you cover the additional cost you’re going to incur if you buy a home that needs some serious TLC. As with most of these home-buying incentives, it’s a loan for people who are going to live in their homes, not for investors. Fortunately, you might also be able to get a 203(k) loan if you’re already living in a home and just decide to refinance to cover the cost of repairs.
This one is interesting, because the Energy Efficient Mortgage isn’t technically your loan. It’s just a thing where, if you buy an energy efficient home, your mortgage lender can be a little looser with their terms. You may qualify for more home because the lender knows your energy bills will be lower, for instance, or you may be able to finance improvements that will make your home more comfortable and affordable while saving on your electric bill.
Good Neighbor Next Door
If you’re a cop, firefighter, EMT or school teacher, this interesting program can set you up, big-time. You could save half off the price of a home. Yes, half off. The homes available are in what the Department of Housing and Urban Development calls ‘revitalization areas,’ so you can’t just pick out whatever home you want. If you think this sounds good (and I know I do, though I don’t qualify), check this map to see homes available near you.
State and Local Programs
Everything before this point has been stuff you could use from anywhere in the United States, but that isn’t the end of the resources you can find to help get you in a home. Your state might have programs that you could use to lower your downpayment, reduce your interest rate or just save you some money on your house. You may even be eligible for a grant – free money just for buying a home. Find your state at HSH.com to find out what’s available in your neck of the woods.
Get Some Help
You know who really wants you to buy a home? No, not your parents, though they would like it if you would move out, or at least start chipping in for groceries. I’m talking about your realtor, who will get a commission if they can sell you a home. And since they want to help get you into a home, they’re a great resource for helping you find the home-buying incentives that will make it easier. Talk to your realtor and your mortgage advisor, and let them know you want them to check out every option to make it easier to get into your home. They’ll be familiar with your situation and they’ll know what programs apply to you.
Don’t let weak credit or the lack of a humongous savings account keep you from finding your home. There are plenty of people out there who want to help you buy a home, so do a little homework, ask a few questions, and grab your own slice of the American dream.