Did you know there are programs that can boost your home-buying power and make home ownership possible? Here’s information on some of the loans and down-payment assistance programs available to first time homebuyers, including how you can access them.
Federal Government Down Payment Assistance Programs
First Time Home Buyer Assistance Programs: These vary year to year, but they are almost always out there! A current Affordable Housing Program (AHP) product gives eligible first-time buyers as much as $4 in matching funds for every $1 they contribute to their down payment or closing costs – up to $5000! This program launches each January and continues while funds last.
AHP products aren’t available through every lender – Capital Bank is one of the places authorized to work with you to apply for them.
Federal Housing Authority (FHA) Home Loans: This type of loan helps buyers who have less than perfect credit scores and/or only a small down payment (many first-time buyers are in this boat!). You work through a bank or lender but won’t have to meet their strictest standards – FHA-backed loans have down payments as low as 3.5 percent of the home price (instead of the typically 10-20 percent down payment for a conventional mortgage). An FHA home loan could really help to reduce the total amount of money you need upfront.
This helps make home ownership more affordable for lower- and middle-income buyers. However, you may have to carry mortgage insurance. That monthly premium is added to your mortgage payments until you’ve built up equity in your home (until the principal is paid down to a required amount).
FHA 203(k) Loans: This loan is for buyers who can afford a home if they purchase a fixer-upper (and they can see the property potential!).
The amount of the loan you get is based on an estimate of the property value after it’s fixed up. That means the money for improvements is wrapped in as part of your mortgage. This has several advantages: you have the money for renovations right away, you pay off the cost of renovation over the lifetime of the mortgage, and you save on interest payments (secondary loans such as a construction loan or home equity line of credit typically have higher interest rates than your primary mortgage).
Loans for Military Veterans: The Department of Veterans Affairs (VA) offers some of the best home-loan terms available, specifically for veterans and active duty military. We’ll be covering specific loans and down payment assistance programs specific to veterans in a future blog. Capital Bank is a VA-approved lender and we waive our fees for qualified VA borrowers.
State and Local Government Down Payment Assistance Programs
Because homeownership and paying property taxes are vital to every local economy, many state governments offer help to first-time homebuyers. For example, in Maryland – where Capital Bank is headquartered* – the SmartBuy program helps qualifying homebuyers with student debt pay off that debt through special mortgage financing.
Check your state and local government websites to see what loan- or grant-assistance programs are available to homebuyers. Or go through the Housing and Urban Development (HUD) portal to find the link to your state.
Your Bottom Line for Mortgage Assistance Programs
Don’t assume that a low down payment will limit you when it comes to buying a home. Talk with a loan officer at Capital Bank before you house-hunt to see what homebuyer assistance and loan programs you can qualify for. That information may change the picture entirely – you may find yourself suddenly able to afford buy your first home!
*Capital Bank, N.A. NMLS 401599 is a state-approved SmartBuy mortgage lender in Maryland. Member FDIC and an Equal Housing Lender.