Government Grants for First Time Home Buyers
From LoveToKnow Mortgage
Some of the financial stress of buying your first home can be offset by government grants for first time home buyers. Federal, state and local governments frequently have grant programs available, so with a little research you may find the perfect program to meet your needs.
Finding the Cash
Having enough income to qualify for a monthly mortgage payment is important for first time home buyers. However, it is also important to have enough cash when you purchase the home to pay for the down payment and the loan closing costs. The money required can quickly deplete a home buyer's savings account.
Some home buyers turn to relatives to acquire enough cash to make a down payment that is large enough to qualify for a lower rate or to lower their monthly mortgage payments. Other home buyers do not have access to, or prefer not to use, money from their relatives. In fact, some home loan programs are not available to first time homebuyers who use money from friends or family to fund a down payment.
The cash source for many first time home buyers is a mortgage assistance grant program. A grant is cash that is paid to an individual for a specific purpose. People who receive grants are required to use the grant money - called the award - for very specific purposes. For example, grants are awarded to scientists to continue their research, teachers to set up special educational programs and a variety of other individuals with special needs.
Lenders and government agencies have been known to offer grants to first time home buyers as a way to encourage them to get into the home market, apply for a home mortgage loan and provide down payment assistance. Starting in 2008, lender grants were phased out but government-sponsored grants continue to be available.
Finding Government Grants for First Time Home Buyers
Grant programs are available through federal, state and local governments. Some grants are provided directly by the government and others are offered through non-profit organizations. Government programs are funded by annual budgets so it is no uncommon for a grant program to only be available for a specific period of time. The program may be reinstated in a following year; however, the qualification restrictions may be revised.
Federal Grants
Government grants for first time home buyers are available through Department of Housing and Urban Development (HUD) programs. Many of these grants are in the form of special financial assistance for individuals whose income may preclude them from applying for a loan or funding a down payment.
Programs such as the American Dream Downpayment Initiative, the HOME program and the Good Neighbor Next Door program provide special funding assistance to first time homeowners. These programs provide lower income individuals with down payment assistance and lower monthly payments.
Tax credit programs were enacted as part of the economic recovery acts passed by Congress in 2008 and 2009. These programs provide a tax reduction or refund to first time home buyers or individuals who have not owned a home in the prior three years. These programs are totally refundable to the home buyer, meaning that the home buyer will receive the full amount of the tax credit even if the credit exceeds their tax liability. For example, if the home buyer qualifies for the full $8,000 tax credit for a home purchased in 2009, however they only owe $2,000 in taxes, they will receive a $2,000 credit on the taxes they owe plus they will receive a $6,000 tax refund.
State and Local Grants
Government grants are also available through state and local organizations. The grants are typically offered through organizations involved in low-income housing assistance. For example, many cities offer a homeownership voucher program to lower income residents. This program provides temporary help to a homeowner who is having trouble paying their monthly mortgage or other basic expenses of homeownership. The homeowner must apply for the voucher and there may be a very long waiting list. The program may be funded by the city or it may be supplemented with funds from HUD. The availability of the vouchers is dependent upon the funds available. HUD's website includes a listing of cities currently participating in the homeownership voucher program.
Homeownership is a Responsibility
A grant can provide the boost needed by a first time home buyer. It can supplement the funds needed for a down payment or closing costs. In the case of vouchers, a homeowner can receive temporary help meeting their mortgage responsibilities during emergency times such as unemployment or illness. A homeowner who receives a grant is still responsible for the ongoing commitment of homeownership including mortgage payments, taxes and home maintenance.
Learn More
This page has been accessed 2,194 times. This page was last modified 01:38, 1 March 2009.
© 2006-2009 LoveToKnow Corp.
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