Go-To HUD Resources for First-Time Homebuyers

Everyone could use a bit of help now and again, and first-time homebuyers are no exception. The Department of Housing and Urban Development (HUD)—which oversees government programs that help Americans with their housing needs—can make affording a home easier through government-backed FHA loans, special home-buying programs, HUD-funded housing counseling agencies, and a variety of other helpful resources. Here are several HUD first-time home buyer resources and programs you should consider, plus everything you need to know about FHA loans.

There are a variety of home assistance programs available for first-time homebuyers, at both the state and federal levels. First-time homebuyers across the country have the option of putting as little as 3 percent down with the purchase of mortgage insurance, which can allow you to start building equity without saving up for a 20 percent down payment. Here are a few other home assistance programs that you may be eligible for:

• State Homebuyer Programs: State and local governments and other organizations sponsor a variety of programs to assist homebuyers. Check the information for your state to see if there are any programs for you.  
• Good Neighbor Next Door: This program offers up to 50 percent off the list price on qualifying housing for law enforcement officers, teachers, firefighters, or emergency medical technicians.
• Homeownership for public housing residents: A way for public housing residents to convert their rent into a mortgage payment.
• Indian Home Loan Guarantee Program: This offers low down payments and flexible underwriting to American Indians and Alaska Natives.
• American Dream Downpayment Initiative (ADDI): This initiative offers home-buying assistance funds for qualifying low-income applicants.
  
  

These and other programs can make affording a home easier by reducing the required down payment, lowering the home list price, contributing housing funds, offering flexible underwriting, and more. 

→ Need more guidance on navigating the first-time home-buying process? Download our Mortgage Preparedness ebook.

Other HUD Resources for Prospective Homebuyers

In addition to housing assistance programs, HUD offers a variety of other resources to make the home-buying process easier and to make sure that prospective homebuyers have access to important information. Here are a few useful resources for first-time homebuyers:

• Talk to a housing counselor: Find a HUD-funded housing counseling agency near you to get free or low-cost advice on buying a home. You can also look into taking a homebuyer class.  
• Know your rights: HUD offers information on the rights of prospective homeowners, including this fair housing brochure. 
• Home-shopping checklist: Use this checklist to easily compare all the homes you tour.
• Home repair programs: HUD offers a few different home rehabilitation and repair loans as well as information on how to protect yourself against deceptive contractors and how to incorporate energy-saving features into your home.
• HUD home listings: HUD homes are foreclosure properties owned by the federal government that are sold to the highest bidder. If you keep an eye on the listings in your area, you could score a great deal.
  
  

It’s important to be aware of all your options before committing to a large purchase like a home. In addition to using these resources, speaking with an experienced loan officer about your specific goals and how to achieve them can help you on the way to homeownership.

What to Know About FHA Loans

FHA loans are mortgages insured by the Federal Housing Administration (FHA), which is part of HUD. FHA mortgage insurance protects lenders against loss if a borrower defaults on their mortgage. This enables lenders to offer low down payment loans to borrowers who might be considered a higher risk. Here are a few of the requirements for FHA loans:

• Steady employment history (for last two years)
• Minimum down payment of 3.5 percent
• The house must be your primary residence
• Monthly mortgage payments should not add up to more than 31 percent of your monthly income (can be up to 40 percent in some cases)
• Total debt-to-income ratio should be less that 43 percent (can be up to 50 percent in some cases) 
• Minimum credit score of 580 (can be as low as 500 if you put 10 percent down)
• At least three years out of foreclosure
• At least two years out of bankruptcy 
  
  

If you qualify for an FHA loan, they can come with a few benefits, including:

• Low down payments (put as little as 3.5 percent down)
• Low closing costs
• More flexible credit qualifying (minimum of 580 with 3.5 percent down; minimum 500 with 10 percent down)
• Debt-to-income ratios of up to 50 percent are allowed
  
  

FHA loans are a good option for you if you have limited savings or a low credit score. They are easier to qualify for than conventional mortgages and can help you to start building equity now, rather than waiting until you’ve saved up for a 20 percent down payment or significantly improved your credit score. If you opt for an FHA loan you will have to pay both an upfront mortgage insurance premium (1.75 percent of the loan amount), as well as an annual mortgage insurance premium (anywhere from .45-1.05 percent). 

Discover More About the Home-Buying Process

Interested in hearing more about how to navigate the home-buying process? radius loan officers offer their best advice for first-time homebuyers in this Mortgage Preparedness e-book.