Given the lower requirements for down payment, Federal Housing Administration (FHA) loans are a natural — if not a perfect — fit for the many down payment assistance programs available to help you on your way to buying a home. Most federal grants are targeted to the first-time home buyer, and are intended to help those individuals get started toward home ownership. These grants shouldn’t be expected to cover a large percentage of the new home’s cost, however. Most cover less than 10% of the home’s value, or can be expected to only help pay for certain expenses, such as closing costs. For example, a down payment with an FHA loan is 3.5% of the cost of the home. Current FHA loan guidelines allow for the down payment portion of your home loan to come from several different places — a gift, personal savings, tax returns, and down payment assistance programs. Down payment assistance programs are funded at the city, county, and state levels; due to this funding, the assistance programs are ever-changing. Each program operates on its own budget, and operates with its own set of requirements. Credit score, income levels, and other factors will factor into your eligibility for down payment assistance programs. Since home buyer grants are meant to be used toward the purchase of a new home, there are qualifying rules for these funds. According to the U.S. Department of Housing and Urban Development, grants won’t be given to anyone who doesn’t qualify for a mortgage. Finally, all federal grant programs aimed at first time home buyers will require the individual to attend a HUD-approved house counseling class. These classes help to prepare individuals for home ownership by assisting them in the process of getting their finances in order. By doing so, these individuals stand a greater chance of qualifying for a mortgage. For example, simple courses in home economics or household budgeting are important to the financial success of the individual, and achieving the grant program’s goals.
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