First Time Home Buyer Grants: Important Facts to Know

When it comes to buying a home, having enough money for the down payment is one of the biggest hurdles that first time homebuyers face. Mortgage payments are often on par with or less than rental payments in the local market, but day-to-day life can make it hard to save up such a big chunk of money. Fortunately, many areas offer grants for first time homebuyers that can be used toward the down payment. This can get you into the home you want. Programs can vary from state to state, so it’s important to research what’s available in your area and understand the exact details of the program.

Income Limits
Many programs that offer grants to first time homebuyers have upper income limits. The goal of these programs is to help those with a moderate income achieve their goal of homeownership. Thus, your income needs to be beneath a certain level in order to get the grants. The limits are adjusted depending on the number of people in the family. Sometimes, there are multiple grant programs in an area, and you might qualify for one but not the other.

Requirements for Grant
In order to get the grant, you’ll probably have to go through an interview process with an extensive check into your financial background. You’ll also probably have to budget and save a certain amount of money over a period of time before the grant money becomes eligible. Many programs will require you to go through a training program that covers topics like financial literacy and basic information about buying a home and being a homeowner.

Home Price Limits
The grant program may have a limit on the price of the home you purchase. They want to see you in a home you can afford. It’s important to understand this limit and to take a look at the homes in your area that are available at that price point. In some cities average home prices exceed this limit and it can be difficult to find a home that fits. Additionally, the grant program may also determine a maximum monthly payment they think you can afford based on a review of your earnings and finances. This maximum payment must include the fees for taxes and homeowners’ insurance, so it’s not all about the actual mortgage payment.

Restrictions on Money
You’re also likely to find that the program has some restrictions on how the money can be spent. For instance, some programs might allow you to use the money for the down payment and certain closing costs, but you may be on the hook for other closing costs. You will probably have to spend your own money to hire someone to do the inspection and in paying the earnest money when you make an offer on a home.

Staying in the Home
Before signing on to the program, ask about the requirements for staying in the home. In many cases, you’ll find that the program requires you to stay in the home for a certain period of time before you can move. If you do have to move due to job relocation or something else, you may be required to pay a prorated portion of the grant money you received back to the organization. This could play a big role in deciding whether the grant program is right for you.

With grant money to help you buy your home, it becomes a lot easier to become a homeowner. Though you might have to jump through some hoops in order to get the money, most people will find that it’s well worth their effort.