Various federal, state, and local government agencies offer mortgage help to home buyers. But many people don’t even realize such programs exist. We are publishing this update on 2014 government mortgage help programs in an effort to increase awareness. First-time home buyers struggling to come up with down payment and/or closing-cost funds might benefit from one of the options mentioned below.
FHA Loan Program
The Federal Housing Administration (FHA) insures mortgage loans generated by lenders in the private sector, as long as those loans meet certain predetermined criteria. These are known as FHA loans. In a sense, this program is a form of mortgage help, because it allows borrowers to get a loan with a down payment that is well below industry norms. Borrowers who use this program only have to put 3.5% down, compared to the 5% and up that is standard for conventional loans.
The Department of Housing and Urban Development (HUD), which manages the FHA program, recently launched a campaign designed to improve access to these loans. They are encouraging lenders to offer government-backed financing to well qualified borrowers, even if they have a few credit “dings” in the past. This is one of the most popular mortgage options for first-time buyers, especially those with limited funds.
Government Mortgage Help from HUD
As part of the campaign mentioned above, HUD is also offering government mortgage help in the form of an insurance discount. Starting in 2014, borrowers who undergo housing counseling before making a purchase could receive a discount on the mandatory mortgage insurance that comes with every FHA loan. This gives home buyers a financial incentive to undergo counseling, which in turn will reduce their likelihood of delinquency and default. Call it a win-win.
Under this program, home buyers who meet certain educational requirements will “receive a 50 basis point reduction in the upfront FHA mortgage insurance premium (MIP) and a 10 basis point reduction in the annual FHA MIP,” according to HUD officials.
Learn more about this new FHA program for borrowers.
Down-Payment Assistance Common at State, Local Level
Most of the government mortgage help available in 2014 exists at the state and/or local level. And it often comes in the form of down-payment assistance grants and financing for low- to moderate-income borrowers.
While the details vary from one program to the next, they generally work like this. A state or local government agency, sometimes in partnership with a non-profit housing group, lends the home buyer a certain amount to cover closing costs and/or down-payment expenses. The assistance loans usually have little to no interest applied. In some cases, repayment of the loan can be deferred for up to 30 years, unless the borrower sells or refinances the home.
These government mortgage help programs are often limited to certain types of borrowers, such as first-time buyers or those with low to moderate income. Eligibility criteria vary from one program to the next. Income limits and minimum credit scores are commonly used criteria.
How to find government mortgage-assistance programs in your area:
- Do a Google search for “down payment assistance” followed by the name of your state.
- Do a similar search with the name of your city or county.
- Also try searching “mortgage help” and “home buyer programs,” again followed by your state or city.
- Visit the “Local Home Buying Programs” page of the HUD website, and click on your state.
These steps should help you find government mortgage programs in your area. Whether or not you qualify for them is a different story entirely. But it all starts with research.
Housing Finance Agencies and Non-Profits
Mortgage assistance programs for home buyers are not limited to government agencies. There are also quite a few non-profit organizations that offer some kind of mortgage help or down-payment assistance to select borrowers. Some of these organizations operate at the national level, while others are limited to certain geographic areas.
The Texas State Affordable Housing Corporation (TSAHC) is a good example of a statewide program. They are a 501(c)(3) nonprofit organization that offers grants to first-time buyers and other forms of down-payment assistance. There are similar nonprofit organizations in other states across the country, and most offer some form of mortgage help to low- and middle-income borrowers, including first-time home buyers.
Summary: Government mortgage help programs were shaken up by the housing crisis and subsequent recession. But there are still plenty of assistance programs available in 2014. You just have to look for them. Home buyers should start their research locally, since help is often provided at the city or state level. Follow the steps outlined above to find government and/or non-profit mortgage and home-buying help in your area. It could help you overcome the hurdle of upfront housing expenses, such as down payments and closing costs.