Top Loan Programs Available for First-Time Homebuyers: Part 2

Young happy couple taking selfie with house key at new home

As a first-time homebuyer, it’s important that you know the loan programs available to you. In the first part, we discussed the two popular loan programs available for most homebuyers. In some circumstances, there are also loan programs that can help you buy a home if you have a limited budget or if you want to save your finances for other important matters.

Good Neighbor Next Door Loan Program (GNND)

If you’re working full-time in a pre-approved role and can be considered a “good neighbor” in your community, the United States Department of Housing and Urban Development (HUD) has a unique housing program that’s right for you. The Good Neighbor Next Door (GNND) program will allow you to own your own home by only paying half of the property’s appraised value if you are a teacher, firefighter, in law enforcement, or are an Emergency Medical Technician (EMT). Through the GNND program, you can put a down payment for as little as $100 and an affordable amount of earnest money which you can use upon closing.

To qualify for the program, you must ensure that you’ll remain in your job for a year once you own the home. After closing, you’ll need to reside in your new home for 36 full months (or three years).

VA Loan Programs

For United States Military Veterans, the VA loan program is the way to go if you want to buy your first home and you’re eligible to secure a Certificate of Eligibility (COE). The Department of Veterans Affairs (VA) can help you buy a home without putting a down payment (in most cases) and you won’t be required to take out mortgage insurance. If you’re eligible for a VA loan, lenders may offer you better interest rates due to the VA securing the loan. While the VA doesn’t set a minimum credit score, you will still need to meet the minimum requirements set by lenders as they are lending you the money, not the VA. 

In addition, the VA also has a program for Native American veterans and for veterans whose spouse is a Native American. VA’s Native American Direct Loan (NADL) can help you buy a home without a down payment in most cases and the ability to borrow up to the conforming loan limit in conventional loans.

Although you can utilize a VA loan to help buy a home without putting a down payment, you will need to pay a VA funding fee that you could negotiate with your lender to roll into your loan cost. This one-time payment is a major requirement if you’re buying a home or refinancing your VA loan.

There are a few instances where you may be exempt from paying a funding fee. For example, you’re not required to pay a funding fee if you’re receiving VA compensation benefits as a result of a service-connected disability or if you’re a spouse of a veteran and you’re receiving Dependency and Indemnity Compensation (DIC).

USDA Loan Programs

The U.S. Department of Agriculture (USDA) also has a loan program which you may consider if you’re looking to buy your first home in a rural area. The USDA has a broad definition of the term “rural” which means many suburban areas could also qualify. Similar to FHA loans, the USDA’s purpose is to provide affordable homes to low- to moderate-income households. If you’re eligible to take out a USDA loan, you could potentially become a homeowner without putting a down payment, as well as get low mortgage insurance and an attractive interest rate. This is a great opportunity if your finances are limited and a down payment is an obstacle.

Additional Costs to Consider

While all of the loan programs mentioned here could help you buy your first home, keep in mind that you will also need to prepare for other related homebuying expenses. Closing costs, for example, will need to be settled before you can get ahold of the keys to your new home.

If you want to know more about any of the above-mentioned loan programs or if you want to understand how much you can comfortably afford, a friendly American Eagle Mortgage loan advisor can walk you through your options. Call or email today to better understand your options.

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