How to Get Approved for the Best First Time Home Buyer Grants

Most Americans want to buy a home, but money issues often stand in the way, especially for the first-time home buyer. According to a recent survey, 80% of millennials who are renting want to buy their home but cannot afford it.

But there are many first-time home buyer programs and grants that can give you plenty of financial help so you can get your piece of the American Dream. Here are 5 first time home buyer programs and grants that can help you to get a mortgage at a low interest rate.

Good Neighbor Next Door

This program is sponsored by HUD and offers first time buyer help for people who work in various public sector positions, such as firefighters, police officers, EMTs and teachers. You can get a discount of up to 50% on the cost of the home's listed price if the home is located in a revitalization area.

This program is for people with low to average income, and people with average credit can qualify. Down payments can be as low as 3%.

Local Grants and Programs

Many states and cities offer plenty of grants to first time home buyers. Before you start thinking about buying a home, you should check state and city websites in your area to find information about housing grants and programs that are available.

For example, in California, people who have not owned their own home in the last three years can qualify for help through a CalHFA program. Down payment and closing cost help is available to people with low to moderate incomes. You need to have a 640-credit score, and also must take an approved home buyer education class and get a certificate of completion.

California also has the MyHome Assistance Program that is a deferred payment loan that people with low to moderate incomes can qualify for. It can help you to make your down payment or cover closing costs. You do not need to pay the loan until the home is paid off, sold or refinanced.

Also, California has the School Teacher and Employee Assistance program that offers a deferred payment subordinate loan that can help you to pay for closing costs or the down payment. This program is only for teachers, school administrators and school district employees.

Florida also has various grant programs for first time home buyers. The Florida HFA Preferred 3% Plus Conventional Loan can help first time buyers in the Sunshine State get lower mortgage insurance costs, and a low 30-year fixed rate loan and 3% down payment grant that does not have to be repaid.

Be sure to check with the state and city websites in your region to see if these types of programs are available. Virtually all states have first time home buyer grants and programs with reasonable qualification criteria. The most common obstacle is not credit; rather, some first-time buyers make too much money to qualify for assistance.

FHA Loans

The FHA loan backed by the Federal Housing Administration is not a grant program, but it is a very popular option for the first-time home buyer. These loans are backed by the federal government, so the lender is exposed to less risk when it issues a loan to a person with a lower credit score and income.

To qualify, you should have a credit score of at least 580 to get a 3.5% down payment. But a few lenders may consider issuing a loan if you have a lower credit score than that. There is no maximum income limit for FHA loans. On the down side, you will pay higher than average mortgage insurance costs. But, for a person with a lower credit score, you can get a very reasonable interest rate, so this is a great option for the first-time home buyer with average to poor credit.

USDA Loans

The US Department of Agriculture has a major home buyer assistance program that is a good choice for a lower income and credit borrower who is buying a rural property. The loan is backed by the USDA, and you do not need to make a down payment. You need a credit score of 640 to get processed the fastest, but it is possible to qualify with a lower score.

There are income limitations according to the region, so not everyone will qualify. The most important thing is that the home has to be in a USDA-designated rural area.

Fannie Mae and Freddie Mac Loans

These are conventional loans that usually require a higher credit score, but some lenders offer options for people with lower income and credit scores. You can get a low interest rate and get a down payment as low as 3%, if you have at least a 620-credit score.