The pandemic hasn’t stopped people from buying homes. About 34 percent of homebuyers in 2021 were first-time homeowners, a three percent increase compared to the previous year. Lower interest rates spurred home buying as the United States government wanted to stimulate the economy after the pandemic disrupted financial activities throughout the country. The housing stimulus resulted in an increase in homeownership across the country.
If you’re in the market, consider the recent interest rate increase before buying a home.
Buying a home in the United States is a significant financial investment. For most people, it’s the largest purchase they’ll ever make. And it’s not just the price of the home that you have to think about – there are also ongoing costs to consider. These homeownership expenses include repairs, maintenance and property taxes. And by the time you add it all up, you realize you may not have enough funds to own a home.
But you don’t have to give up on homeownership.
The U.S. government offers several homeownership programs for people who are in the market for a house. If you are a first-time homebuyer, programs can help you buy a home with a lower down payment. The government also offers monthly assistance to people who need help with their mortgage payments.
Here are some housing programs available for potential home buyers.
Housing Choice Voucher (HCV) Program
The Housing Choice Voucher Homeownership Program or Section 8 is a program helping low-income families and individuals buy homes of their own. The program provides vouchers to cover the cost of a down payment or to help with closing costs and ongoing assistance with mortgage payments. It also provides rental assistance or financial support to low-income, elderly and disabled families.
The Department of Housing and Urban Development (HUD) sponsors the program. But local public housing agencies manage the Housing Choice Voucher program. The local housing authority monitors community development issues.
The homeownership voucher program has the following minimum eligibility requirements to apply:
- For rentals, the voucher holder must have lived in an HCV-funded rental unit for at least one year.
- For home buyers, the voucher holder must be a first-time homeowner or not have owned a home within the past three years.
- The voucher holder’s household income must fall below 50 percent of the median income for the area.
- The voucher holder must have sufficient resources to cover any portion of the purchase price or monthly mortgage payments not covered by the voucher.
- Before purchasing a home, voucher holders must attend a housing counseling program through a HUD-approved agency. After they satisfactorily complete the program, they can start processing their house purchase.
Federal Housing Administration (FHA) Loans
The Federal Housing Administration (FHA) offers home loans for borrowers with a credit score of at least 580 with a down payment of 3.5 percent. On the other hand, people with credit scores of 500 can put in a 10 percent down payment.
The federal government insures the loans. Due to this, banks are willing to loan money to riskier borrowers with relatively low credit scores. But borrowers will also have to pay higher interest rates and private mortgage insurance (PMI).
FHA loans are for borrowers who cannot obtain home loans from private lenders. The FHA offers five types of loans:
- Traditional Mortgage – a traditional mortgage is used to finance a borrower’s primary residence.
- FHA 203(k) Improvement Loan – the home improvement loan covers the cost of repairs and renovations of a home. It’s ideal for people buying a fixer-upper.
- Section 245(a) Loan – this graduated equity mortgage (GPM) is for low-income borrowers. It has low initial monthly payments, which gradually increase over time.
- FHA Energy Efficient Mortgage – this mortgage gives homebuyers extra funds to improve the energy efficiency of their homes.
- Home Equity Conversion Mortgage (HECM) – this reverse mortgage converts cash for home equity while retaining the title. It is available for homeowners who are at least 62 years old. The homeowners can withdraw fixed amounts every month.
Rural Development Program
With urban development becoming more expensive, the government has introduced rural development programs to provide affordable housing in less populated areas.
The Rural Development agency of the U.S. Department of Agriculture offers housing programs for individuals and families. This official government organization allows families and individuals to buy, build, or repair affordable homes in rural areas.
The average median income of an area is the basis for the eligibility for loans and grants. The programs offered by the agency include:
- Single Family Housing Direct Loans – these loans are available to low-income families. The interest rate is based on the current market rates and the repayment period is 33 years.
- Single Family Housing Guaranteed Loan Program – this program allows moderate-income homebuyers to build or buy homes without a down payment.
- Single Family Housing Repair Loans and Grants – this program helps low-income homeowners to repair or improve their homes.
- Multi-Family Housing Loans are loans for developing apartments and other multiplexes in rural areas.
- Multifamily Housing Loan Guarantees – The program is for private lenders to help qualified borrowers to acquire more rental units for low and moderate-income families in rural areas.
NACA Homeownership Program
The NACA homeownership program connects low and moderate-income homebuyers to affordable, sustainable home loans and comprehensive homeownership education. Once safely connected with affordable loans, the program offers borrowers the opportunity to purchase a home with no down payment, no closing costs and no origination fees.
The Neighborhood Assistance Corporation of America (NACA) created the program for borrowers who can meet its eligibility requirements.
These requirements include:
- No adult family members of the household should own any other property.
- The recipient should occupy the home throughout the life of the mortgage.
- Participate in five activities yearly and one activity or action before and after NACA qualification.
- Abide by the membership terms of NACA.
The NACA mortgage is also limited to specific property types, including single-family homes, multi-family homes, condominiums, modular homes, and mixed-use properties.
VA Home Loan Program
The Department of Veteran Affairs also offers a homeownership program for service members, veterans, and surviving spouses. The program aims to make it easier for individuals to purchase, build or repair their homes. It also helps them to retain a home.
The department provides a home loan guarantee benefit, allowing for more favorable terms from private lenders. In addition, the department also offers other housing-related programs to help with the purchase of the property.
A VA home loan does not require down payments for specific borrowers. But some lenders may require one. The interest rates for a VA loan are usually lower than conventional loans. There are also limited closing costs. And there is no need to purchase private mortgage insurance (PMI). Qualified individuals can use the VA home loan benefits multiple times.
Things to Consider When Buying a House
When buying a home, save money for the down payment, which is typically 20 percent of the total cost of the property. But the figure can change since some home assistance programs offer low or zero down payment options.
It would help if you also considered what to look for in a home to ensure the budget is enough. After saving enough money, you can look for properties that fit your budget and needs.
Looking for a house can be challenging for some people. But with a clear idea of what you want and some helpful tips, the process could be easier.
The first step is to get pre-approved for a mortgage. This will give you an idea of how much money you can borrow and your monthly payments. A pre-approved loan allows you to work on your budget. It can also help you find a house that’s a little more expensive than you originally wanted.
Another thing to consider is the type of house you want. There are many different types of homes on the market, and it’s crucial to find one that fits your needs. If you have a family, you may want a house with a yard or a swimming pool. You may want a smaller home or an apartment if you’re single. You should also think about the location of the house. Do you want to be in the city or the suburbs? You can also consider public housing units if you have a limited budget.
Once you’ve considered these things, you can start looking at houses. It’s a good idea to look at several houses before making an offer. This will give you a better idea of what’s on the market and what you can afford.
When you find a house you like, it’s essential to have a loan officer or real estate agent look at it with you. They will be able to tell you if the house is in good condition and if there are any problems with it.
Why is Owning a Home Important?
Homeownership represents independence and stability for many people. It also offers unique wealth-building opportunities and can be a solid investment. Several programs can help make the process easier if you want to buy property.
Aside from personal benefits, homeownership can also improve the area around the property. A stable housing market is essential for a healthy economy, as it creates jobs and encourages spending. When you purchase a home, you’re not just investing in your future — you’re helping to create a better future for everyone.
Buying a house can be daunting, but it can be much easier with the correct information and help. You should also consult with professionals who can help you navigate the process.