What Are First-Time Homebuyer Programs?
First-time homebuyer programs encompass various loan and grant programs that assist new homebuyers with down payments and closing costs. Each program comes with unique criteria such as credit score, income level, and geographic location.
What First-Time Homebuyer Programs Are Offered in Utah?
Here’s what first-time homebuyer programs in Utah entail:
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- FHA Loans: The Federal Housing Administration (FHA) provides mortgage loans made by FHA-approved lenders. FHA loans are backed by the Department of Housing and Urban Development (HUD) and are ideal for first-time homebuyers who have less than perfect credit. The FHA offers single-family and multi-family programs.
- UHC: The Utah Housing Corporation (UHC) was established by the Utah Legislature in 1975. Its objective is to offer quality and safe housing for Utah families with low-to-moderate income. The UHC offers three types of loans—FirstHome, HomeAgain, and Score loans. Their site outlines eligibility criteria for each.
- UHC Veterans Grant: The UHC also provides a Veterans Grant that offers qualified veterans up to $2,500 on their first home. Veterans must first receive a Grant Status Validation from the Utah Department of Veterans Military Affairs (UDVMA) and present this to their lender. Visit the UDVMA site for more information.
- USDA: Backed by the United States Department of Agriculture (USDA), a USDA loan is a program offered to those who are planning to purchase a home outside of a major metropolitan area. If qualified, homebuyers may qualify for a down payment as low as $0. USDA loans typically provide lower interest rates compared to conventional loans. There are two types of USDA loan programs—Single Family Housing Direct Loan Program and Single Family Housing Guaranteed Loan Program.
Apply or obtain pre-approval for any of these loans with a qualified loan officer.
What Is a First-Time Homebuyer Loan?
Buying a home can feel exciting and out of reach simultaneously. A first-time homebuyer loan may offer financial assistance toward closing costs and/or a down payment for those purchasing their first property. Some loan programs have lesser requirements, putting homeownership within reach for individuals who don’t have as much to put down.
Although becoming a homeowner can feel intimidating, first-time homebuyer loans can make it easier to qualify for a mortgage. There are various first-time homebuyer loans available. Depending on which state, county, or municipality you plan to buy in, you may not qualify for all options.
Examples of First-Time Homebuyer Loans
First-time homebuyer loans include government- and state-backed programs with more flexible eligibility requirements than most conventional loans, like those backed by Fannie Mae or Freddie Mac. Options include:
FHA Loans
Backed by the Federal Housing Administration, an FHA loan has the following approval criteria:
- Credit score of at least 580 for a 3.5% minimum down payment or credit score between 500-579 range for a 10% minimum down payment
- Debt-to-income (DTI) ratio no greater than 43%
- Property must undergo FHA appraisal
- Buyer must maintain mortgage insurance
- Property must be buyer’s primary residence
USDA Loans
The U.S. Department of Agriculture (USDA) backs qualifying mortgage loans to encourage land development in rural areas. Qualified borrowers must:
- Have a credit score of 640 or higher, although the USDA has some flexibility on this requirement
Only first-time homebuyers can sometimes qualify for this type of mortgage loan backing.
VA Loans
Qualified U.S. military members and their spouses may qualify for loans backed by the U.S. Department of Veterans Affairs (VA). Buyers using this option may qualify for lower interest rates and other benefits.
UHC Loans
The Utah Housing Corporation (UHC) currently offers three loan programs for buyers in the state:
- FirstHome Loan: Credit score of 660 or higher, meet income and purchase price limits
- HomeAgain Loan: Credit score of 660 or higher, meet annual income limit
- Score Loan: Credit score of 620 or higher and recovering from previous credit challenges, meet purchase price and annual income limits
If you’re ready to start the process of purchasing your first home, speak with a trusted loan officer to find out what a first-time homebuyer loan is and whether you qualify.
Is There a First-Time Homebuyer Credit?
A first-time homebuyer credit was introduced during the Obama administration to assist new homeowners who closed on their home during the eligibility period, which expired in 2010. Although members of Congress have sometimes introduced new legislation seeking to revive the credit, there is currently no first-time homebuyer credit available from the federal government.
That being said, programs are available that can make the process easier and more affordable for first-time homebuyers.
Who Is Considered a First-Time Homebuyer?
Per the U.S. Department of Housing and Urban Development (HUD), a first-time homebuyer is anyone who meets the following criteria:
- Someone who has not owned a residence during the last three years. The cut-off date for this three-year period is their property purchase date. This rule applies to their spouse as well.
- A single parent who has only owned property with a former spouse.
- A displaced homemaker who has only owned a home with a spouse.
- A person who has only owned property not affixed to a permanent foundation.
- A person who has only owned property that was not in accordance with state, local, or model building codes. This point only applies if the residence cannot be brought into compliance for less than the cost of establishing a permanent home.
What Are Some Key Benefits Available to First-Time Homebuyers?
First-time homebuyer programs provide individuals with incentives such as:
- Tax credits. Homebuyers can receive tax credits, which are credits they can use toward federal income taxes.
- Tax deductions. Homebuyers may be eligible for deductions in property taxes, mortgage interest, mortgage insurance premiums, and loan origination fees.
- Penalty-free IRA access. First-time homebuyers may withdraw IRA funds for housing costs penalty-free.
