“You’re throwing away your money, paying rent each month.” Does this sound familiar?
Most likely you’ve heard it from your family, friends, or the television commercials as all of them urge you to take the next logical life step and purchase your first home.
Purchasing a home isn’t easy though, especially if you don’t have the cash in hand for the entire cost.
However, if you are interested in purchasing your first home, there are grants available that can help you afford the initial costs.
Purchasing Your First Home
If you are ready to take the next step in your life and purchase your first home, there are several factors you should consider.
While your friends and family may be pushing you into purchasing a home, you need to consider whether you are actually ready.
Consider the following questions when you are trying to determine whether now is the right time for you to buy a house:
- What does your credit look like? Purchasing a home is much easier when you have great credit. While many home grants will assist with the money you need for your down payment, closing costs, and fees, none will provide you with 100% of the money you need for a home. If you don’t have the extra cash in your wallet, you are going to need to obtain a loan. The higher your credit, the easier it will be to get a loan with low interest rates.
- How much can you afford? Getting help from a grant for the downpayment of your home is one thing, but being able to afford your monthly mortgage payment is just as crucial. The amount you pay each month should only be a percentage of your total monthly income so you can afford other household expenses.
- Do you know what it costs to own a home? Unlike when you rent, you will be responsible for utility bills, homeowner’s insurance, and regular maintenance costs for projects like heating, cooling, plumbing, and roofing.
Where Should Your Search Begin?
According to About.com, about 80% of home searches begin on the Internet and this may be where you should be your search as well.
With just a couple clicks of the mouse, you may be able to find the home of your dreams. You should also consult a professional and licensed real estate agent to help you search for the home you want.
When you finally find that home you have always dreamed of owning and secure a loan for a portion of the cost, it is time to make an offer.
Your real estate agent will help you complete the offer and will present it to the owner of the home. Once your offer is accepted, you should have an inspection done of the home to assess if there are any physical defects, structural issues, hazards or bug problems in the house that may be expensive to fix.
About First Time Home Owner Grants
Now that you understand the basics behind purchasing your first home, it is time to take a look at the financial end. First time home owner grants are available for many qualifying individuals.
These grants can provide help with:
- Down payments
- Closing costs
- Rehabilitation assistance
- Purchase Cost
First time home owner grants are available through HUD, also known as the Department of Housing and Urban Development. While HUD does not actually give out the grants, they do provide the financing to states and local governments so they may provide first time home owners with the grants.
Two specific grants for first time home buyers that are offered through HUD are:
- (ADDI) American Dream Down Payment Initiative - This grant program assists first time buyers with the biggest hurdle they may face on the road to home ownership: coming up with the money for a down payment. Those who qualify for ADDI assistance can receive up to $10,000 for their home’s down payment or up to 6% of the home’s cost for the down payment.
- HOME - This federal block grant is designed to assist low income individuals by providing funding to states that can be used to help with home purchases. While this grant is not directly given to the home buyer through HUD, the money HUD gives to the state can be used for local home buyer programs so individuals can receive assistance with down payments, closing costs, earnest fees, and the total cost of their new home.
When you are trying to obtain a grant, you need to consider a few factors:
- If you receive a grant, it will not cover the entire cost of your home.
- If you are not going to be able to use the grant money toward a mortgage, you will not qualify for the grant.
- You must be a first time home owner to obtain the grant.
- Before you make your first purchase and obtain the grant, you will be required to attend a Housing Counseling class that has been approved by HUD.
- You will need to fill out an application for a grant at your local Department of Human Services or local Public Housing Authority. You must provide information on your citizenship, income, and need. Only those who really need grant assistance and whose income does not exceed 80% of the average income for their area will qualify for assistance.
Problems Associated with First Time Home Owner Grants
While a first time home owner grant can help you quickly obtain the home of your dreams, there are problems associated with it.
For instance, the grant will increase the amount of money you can obtain from a bank or financial institution so that you are borrowing more money than you are receiving with the grant.
If the housing market is competitive, others will also be taking advantage of the grant and the higher loan amounts, resulting in an increase in the cost of low-end housing. This means you will end up pay more for less, and you might end up swimming in just as much debt as you would have if you had never applied for the grant.
If you are ready to purchase your first home, but don’t think you can afford it, consider looking into first time home buyer grants.
A list of state provided grants can be found on the HUD website.