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First Time Home Buyer Grants

Buying a home for the first time is a significant milestone. It is also a complex process, filled with paperwork, backgroundchecks and fees. One such fee homebuyers often worry about is the mortgage down payment. Fees like this often scare peopleaway from purchasing a home, but there are programs in place to help out. Many first-time homebuyers are eligible for housinggrants. A first-time homebuyer grant helps reduce the initial costs of purchasing a home. This makes the process of purchasinga home less scary and much more financially manageable. Learn about first-time homebuyer grants below, including those availablespecifically for residents of Virginia.

What Are First-Time Homebuyer Grants?

A first-time homebuyer grant is a state or city program meant to help residents purchase their very first house. These grantprograms help with the cost of the down payment required by mortgage loans. Typically, a mortgage loan includes a down paymentof 3 to 3.5 percent of the overall price of the property. When combined with a housing grant, homeowners are able to purchasea property with little to no down payment.

Home buyer grants are limited to live-in properties. This means that funds are not awarded to buyers for properties usedas a second home, business or rental. The type of grants available to new homebuyers depend on the state they live in, whatkind of loan they apply for and whether or not other basic qualifications are met.

Basic Requirements

Most housing grants are handled by state and local governments. As a result, each state has its own specifications that applicantsmust meet in order to receive a grant. However, most grant programs follow similar requirements. One of the most basic qualificationsis first-time home buyer status. This status is often extended to include individuals who have not purchased a home withinthe last 3 years. Buyers who fall under this category may qualify for a first-time home buyer grant. Other common requirementsinclude the following:

  • Income limits
  • Credit score minimums
  • Ownership and occupancy requirements
  • Maximum home price/grant amounts

Requirements for income and maximum home prices often vary from county to county within each state. The purchase price affectsthe size of the grant, which is capped at a specified amount. Additionally, many states require new homeowners to take ahomebuyer education course. These short courses are usually available online or in a traditional classroom setting.

Contact your local government housing authority to learn about grants that are available in your area. In Virginia, mortgageloans and grants are handled by the Virginia Housing Development Authority (VHDA). The VHDA offers one main grant to first-timehomebuyers, known as the Down Payment Assistance (DPA) Grant.

Down Payment Assistance Grant

Down Payment Assistance is a program that offers grants to new home buyers in Virginia. A DPA grant helps cover the costof a down payment for certain VHDA mortgage loans. Unlike grant programs in some other states, no repayment is requiredas long as the homeowners continue to live on the property for at least nine years. In addition, the grant cannot be usedtowards closing costs or combined with other down payment assistance programs. Home buyers must meet all of the programrequirements in order to receive funds. All applicants must:

  • Qualify as first time home buyers or purchase a property in a targeted area.
  • Complete a VHDA home buyer education course.
  • Meet income and credit score requirements.
  • Plan to live within the home.
  • Have an eligible mortgage loan.

Not all mortgage loan programs are eligible for the DPA grant. In fact, the only programs that qualify are the VHDA FannieMae loan and the VHDA Federal Housing Administration (FHA) loan. Each of these loans has their own specifications regardingcredit score and grant amount.

  • VHDA Fannie Mae: A grant for a Fannie Mae loan is equal to 2 percent of the purchase price. Applicants musthave a credit score of at least 660.
  • VHDA FHA: These loan grants are equal to 2.5 percent of the purchase price. The minimum credit score requiredis 620.

Other Assistance Programs For Home Buyers

The DPA is not the only home buying program that VHDA offers. Other assistance is available to homeowners as well, as longas they meet the necessary qualifications. Obtaining a Mortgage Credit Certificate (MCC) allows homebuyers to receive taxcredits on their home in many states, including Virginia. Additionally, residents who are active or veteran members of themilitary may be eligible for the Granting Freedom program.

Mortgage Credit Certificate

Part of becoming a homeowner is paying a mortgage interest rate. Fortunately, this payment is deducted from the homeowner’sincome each year, but it is still a hefty expense. With this in mind, Mortgage Credit Certificates offer some relief tohomeowners. While not a grant, this certificate helps new homeowners by providing them with a tax credit.

An MCC has the potential to save homeowners a few thousand dollars each year, by applying a portion of the interest rateto their income tax. This credit is equal to 20 percent of the annual mortgage interest rate. Homeowners with an MCC canapply the tax credit every year that they continue to live on the property. Moreover, those who receive an MCC are stilleligible for a DPA grant if they meet all other qualifications of the program.

Granting Freedom Grant

The Granting Freedom grant program aims to provide assistance to active and veteran service members. In particular, it helpsprovide the funds needed to modify a home for service-related injuries and disabilities. Eligible individuals are qualifiedfor a grant amount up to $6,000, depending on need. This program works with the U.S. Department of Veterans Affairs to determinewhat renovations are necessary for each beneficiary. Renovations covered by the grant include installing wheelchair ramps,grab bars and wider doorways. It is worth noting that this grant is not limited to homeowners, but is available for eligiblerenters as well.