Amidst the decline of the housing sector, investors were given access to some of the best property values we have seen in recent history. A significant number of underwater homes, on a national level, facilitated the acquisition of unbelievably cheap houses. Of particular concern, however, was the decreased rate of first-time homebuyers that resulted from investor activity. Prospective buyers were forced to watch from the sidelines as investors outbid them with cash and higher offers.
However, in what appears to be a sustainable trend, the housing sector continues to inch towards recovery. Higher property values have dramatically reduced investor participation. A distinct lack of deals has prevented residential developers from acquiring as many properties as they had in the past, leaving more room for first-time homebuyers.
In order to ease their transition, several states have included a number of enticing incentives for first-time homebuyers. Home buying assistance programs, in particular, make owning a house easier for those looking to purchase. From Maine to California, municipalities have implemented specific programs to help first-time buyers achieve the American dream. However, many of these programs are on a first-come, first-serve basis. It is important to check the availability of each program before plans are finalized.
To be clear, each state defines a first-time buyer as someone who has never owned a home or hasn’t been a homeowner in the past three years.
For your convenience, we have compiled a list of the top ten states for first-time homebuyers, and their respective incentive programs:
The following incentive programs are made available to first-time homebuyers in New York:
- Remodel New York: This unique incentive program allows first-time homeowners to not only finance the purchase of their home, but the repairs it needs as well.
- Achieving the Dream Program: Specifically developed for those designated as low-income earners, this program provides loans with extremely low fixed rate mortgages and up to 97% financing on one- and two-family homes. To meet requirements, the prospective buyer must contribute 1% of the property’s value out of their own pocket.
- Construction Incentive Program: First-time homeowners are awarded the opportunity for up to 97% financing for a long-locked period if they acquire a recently rehabbed home.
- Low Interest Rate Program: As its name suggests, this incentive offers people a competitive fixed-rate mortgage at a low interest rate.
- Down Payment Assistance Loan: Otherwise referred to as DPAL, this program provides down-payment assistance for first-time buyers. It can be used in conjunction with the previously mentioned incentives. A DPAL has a 0% interest rate and no monthly payments, and it is forgiven after 10 years, as long as the buyer remains in the home.
The following incentive programs are made available to first-time homebuyers in Colorado:
- SmartStep Program: If a first-time homebuyer contributes at least $1,000 to the purchase of a 30-year fixed-rate mortgage, they will receive below-market interest rates on the respective loan.
- SmartStep Plus Program: The “plus” program offers the same advantages as the standard program, but offers a low-interest rate, 30-year second mortgage to help buyers pay their down payment and closing costs.
- HomeOpener and HomeOpener Plus Programs: These programs offer the same incentives as the SmartStep programs, but waive the initial $1,000 purchase minimum.
- Second Mortgage Loan Program: Incentives from this program may be used in conjunction with the previous “plus” programs, as a means to pay for down payments and closing costs. The second mortgage awarded to first-time homebuyers is available for up to 3% of the first and shares the same interest rate.
- Mortgage Credit Certificates: Designed to save owners money each year they remain in their first home, this program is a continuation of the federal homebuyer tax credit.
The following incentive programs are made available to first-time homebuyers in Tennessee:
- First-Time Homebuyer Program: Not specific to Tennessee, this incentive program gives buyers the chance to acquire very competitive rates on a 30-year fixed-rate mortgage.
- Great Rate Program: According to the parameters set forth by this program, those who qualify may be awarded a 30-year fixed-rate mortgage with a lending rate as low as 3.6 percent.
- Great Advantage Program: Similar to that of the Great Rate Program, this incentive allows borrowers to apply 2% of the loan amount to cover the down payment and closing costs if they elect for a higher interest rate.
- Great Start Program: Through the help of this program, first-time homeowners can apply 4% of the loan to cover the down payment and closing costs. The rate on this loan, however, is slightly higher at 4.2 percent.
- New Start Loan Program: This incentive was specifically drafted to encourage low-income, first-time buyers to acquire newly constructed homes.
The following incentive programs are made available to first-time homebuyers in North Carolina:
- FirstHome Mortgage Program: Often referred to as a mortgage revenue-bond (MRB), this incentive program offers buyers a 30-year fixed-rate mortgage with interest rates that are below or at least competitive with market rates. It may be acquired with a down payment between 0 to 3.5 percent.
- Down Payment Assistance: This program provides buyers with as much as $8,000 in the form of an interest-free second mortgage to cover the down payment and closing costs of a house. To qualify, borrowers must contribute $1,000.
- Second-Mortgage Program: With a minimum contribution of $5,000, this program offers the option of obtaining a second mortgage of $25,000 or 20% of the sale price for buyers purchasing a newly constructed home.
- Mortgage Credit Certificates: A mortgage credit certificate helps first-time buyers in North Carolina take their mortgage-interest deductions a step further. Qualifying buyers can claim 30% of their mortgage interest as a tax credit.
The following incentive programs are made available to first-time homebuyers in New Jersey:
- First-Time Homebuyers Program: Those who qualify, with a monthly debt-to-income ratio of no more than 38%, can secure a 30-year mortgage with below-market interest rates and a down payment of just 3.5 percent.
- Smart Start Program: As a second-mortgage program, this incentive provides buyers with down payment assistance of up to 4% of the first mortgage amount. More importantly, however, there is no interest rate on the second mortgage.
- Purchase/Rehab Mortgage Program: If a borrow meets the requirements set forth by the Federal Housing Administration (FHA), they may receive low interest rates on loans used to acquire a home with the intent to rehab it.
- Home Plus: The Home Plus incentive program allows buyers to receive low interest rates in addition to allocating up to $15,000 worth of repairs into the first mortgage. Repair restrictions do apply.
The following incentive programs are made available to first-time homebuyers in Ohio:
- First-Time Homebuyer Program: Similar to many other states, Ohio offers qualifying homebuyers the chance to obtain very competitive interest rates on 30-year fixed-rate mortgages.
- Down Payment Assistance Grant: The state of Ohio provides those who qualify with the option of applying 2.5% of their purchase price towards their down payment and closing costs.
- Grants For Grads Program: To qualify for this program, first-time homebuyers must have a high school degree and some form of postgraduate degree within the last two years. Assuming they qualify, this incentive allocates 2.5% of the purchase price to assist with the down payment and closing costs. The assistance takes the form of a second mortgage.
- Home Sweet Home Program: Specifically drafted for those intent on purchasing a newly constructed home, this program offers an extended rate-lock period in which rates are locked at 0.25% higher than current OHFA rates. In exchange, buyers are awarded 180 days at a lower rate while construction is completed.
The following incentive programs are made available to first-time homebuyers in North Dakota:
- FirstHome Program: Once again, like other states, North Dakota offers competitive rates for firs-time homebuyers.
- HomeKey Program: During the first year of the loan’s amortization period, qualified borrowers receive an interest rate that is approximately one percent below the standard FirstHome rate. The interest rate and monthly payments are stepped up twice during the next two years, holding constant for the remaining term of the mortgage.
- Start Program: With a minimum contribution of $500, this program offers slightly higher interest rates, but permits buyers to receive a financial sum in the amount of 3% of the first mortgage.
- Down Payment and Closing Cost Assistance Program: This down-payment assistance offers a zero interest, deferred-payment loan, which is either worth $3,000 or 3% of the purchase price, whichever is higher. To qualify, buyers must commit $500 of their own money.
The following incentive programs are made available to first-time homebuyers in Montana:
- First-Time Homebuyers Rates: Continuing with the trend, Montana offers new buyers attractive interest rates on 30-year fixed-rate mortgages. To qualify, buyers must commit 0% to 3.5% of their own money to the purchase price.
- First-Time Homebuyer Savings Account Program: As its name suggests, this program offers incentives to those who set up a savings account dedicated to the purchase of the house. Buyers are not required to deposit a specific amount, and deposits can be made for up to 10 years or until a home is purchased. As long as the money remains in the account or is withdrawn to pay for first-time-buyer expenses, it’s not included as state taxable income.
- NeighborhoodWorks Montana: NeighborhoodWorks was drafted to provide assistance in the areas of down payment and closing costs. Borrowers will encounter asset limitations of $5,000 liquid cash and $70,000 in total family assets.
- Mortgage Credit Certificates: Certificates in Montana have the same impact as other states. However, they can’t be used in conjunction with a first-time homebuyer mortgage.
The following incentive programs are made available to first-time homebuyers in Connecticut:
- Homebuyer Mortgage Program: Only permitted for those purchasing a primary residence, this program offers attractive rates on 30-year fixed mortgages.
- Down Payment Assistance Program: If they qualify for the previous incentive, first-time homebuyers may receive a 25% of the purchase price to apply to the down payment of the respective property.
- Homeowner’s Equity Recovery Opportunity Loan Program: Otherwise known as H.E.R.O., this program encourages the purchasing of distressed properties. It serves as a neighborhood stabilization effort.
The following incentive programs are made available to first-time homebuyers in Washington:
- Home Advantage First Mortgage Program: The state of Washing offers competitive rates to those purchasing a house for the first time.
- Home Advantage Down Payment Assistance Program: Buyers are awarded the option of 0% interest on a 30-year second mortgage if it is applied to subsequent down payment costs.
- Mortgage Credit Certificates: Certificates in the state of Washington are limited and therefore subject to limited quantities. They may be used in conjunction with the Home Advantage Program.