First-Time Homebuyer Programs in Nebraska

Individuals looking for their first home can feel overwhelmed. Nebraskans can consider first-time homebuyer programs to help them purchase their home.

MoneyGeek analyzes information about low-down-payment, zero-down-payment and Nebraska-specific homebuyer loan programs. This data will help you find the ideal lender that suits your budget and preferences.

For individuals who want to purchase a home, it’s best to evaluate your expenses and budget. It will help you gauge your expectations. One of the most important factors you need to consider is your mortgage down payment.

It is an essential element in your home-buying process. Your mortgage down payment affects your monthly expenses and even your household finances. Paying as much as you can reasonably afford for a down payment is often a good idea, as it will make your monthly payments and interest rates lower.

Generally, the recommended down payment is 20% of the total cost of your preferred home. Homebuyer assistance programs can be an ideal choice for those who can’t save this much.

USDA and VA loans are zero-down-payment loans. Conventional, FHA and FHA 203(k) loans are low-down-payment programs. Nebraska also has various statewide loan programs to help you start financing your ideal home.

You may see many choices, but the best homebuyer program depends on your financial standing and needs.

If you can’t afford a down payment, you still have options. Two types of zero-down-payment loans include USDA and VA loans.

Individuals residing in rural areas may consider USDA loans. Homebuyers can send applications through the U.S. Department of Agriculture and its Rural Development Guaranteed Housing Loan program.

Usually, USDA loans are less costly than conventional or FHA loans. Plus, homebuyers can use the loan to make home improvements for a maximum of $40,000.

Nebraskans can qualify for this loan if this is their primary residence and they live in the property. Individuals must meet the minimum income requirement and be legally able to take out a loan.

USDA loans must not be used for properties that generate income. The property must be less than 2,000 square feet and cannot have an in-ground swimming pool.

Military service members, veterans and their eligible surviving spouses can consider taking out a VA loan when buying a home. It is issued by private lenders and guaranteed by the U.S. Department of Veterans Affairs.

VA loans don’t require a down payment, making it an ideal option. Interested homebuyers should be eligible to qualify, such as meeting the minimum credit score, income and property requirements.

VA loans can be used for buying homes and rebuilding or renovating homes. It can be used to buy a single-family home, modular housing or condominiums.

This loan offers many benefits, like no down payment and no private mortgage insurance, and rates are usually lower.

Nebraskans can browse through low-down-payment loan programs as another way of purchasing a home. There are two main types to choose from, Fannie and Freddie (conventional) and FHA loans.

Fannie Mae and Freddie Mac loans are more commonly known as conventional loans. This kind of loan isn’t government-backed and is widely available to Nebraskans. The requirements depend on the lender.

A conventional loan best suits homebuyers who may have incomplete federal obligations like student loans or taxes. Ideally, you should make a down payment of 20%, but some lenders require only a 3% down payment as long as you buy private mortgage insurance (PMI).

Lenders usually check the debt-to-income (DTI) ratio and the buyer’s income. Homebuyers with a DTI ratio of 45% or less can qualify for a conventional loan.

An FHA loan is a kind of mortgage insured and regulated by the Federal Housing Administration (FHA), even though the funding comes from private lenders. Its requirements are more lenient, as it can require a down payment of only 3.5%. The credit score requirements can be lower than those of conventional loans. It can also grant you a bigger loanable amount depending on your location.

FHA loans best suit individuals who have poor credit records or insufficient funds for a down payment. It generally requires a credit score of 580 for a loan with a 3.5% down payment. A loan with a 10% down payment requires a credit score of only 500.

However, this loan cannot guarantee financing for all condos, as some condominiums are not FHA-approved. It also requires more paperwork than conventional loans, as well as an annual premium added to your monthly amortization.

On the other hand, it has a fixed interest rate and a long repayment period of 15 or 30 years.

FHA 203(k) loans are government-backed loans that let borrowers get standard mortgage and construction loans in one convenient package. Individuals who want to buy and renovate older homes may find this type of loan ideal.

Generally, this loan has two types, standard and streamlined. Standard 203(k) loans primarily cater to more significant home repairs, room remodeling and structural work. This is a better option if you plan to change the roofing system or the layout of the home.

Streamlined 203(k) loans are also known as Limited or Simplified 203 (k) loans, which best suit homebuyers who will do minor, aesthetic repairs and renovations. For instance, this is your better option if you only intend to change the home's flooring.

Homebuyers can qualify for FHA 203(k) loans if they have a credit score of at least 500. But, some lenders may require a credit score of at least 620. Also, you can qualify for this loan if you have a debt-to-income ratio of no more than 43%.

Down payments for FHA 203(k) loans can be as low as 3.5% if you have a minimum credit score of 580. But if your credit scores are below 580, you’ll need a down payment of 10%.

Various federal loan programs are accessible to Nebraskans. In addition, there are several state-specific loan programs that you might want to check out.

The U.S. Department of Treasury provides funding for the Nebraska Homeowner Assistance Fund (NHAF) as part of the American Rescue Plan Act of 2021.

This program helps homeowners with previous due payments for their mortgage, utilities, property taxes and association dues. It also helps borrowers with making upcoming mortgage payments and clearing liens from a homeowner’s property.

The primary requirements to qualify for this loan include the following:

• Property must be located in Nebraska
• Property must be the homebuyer’s primary residence
• Previous utility bill or property tax statement

However, there are income limits on this program, and they’re dependent on the county.

The First Home Program helps individuals who don’t need down payment and closing cost assistance. All interested homebuyers need to meet the Nebraska Investment Finance Authority (NIFA) requirements.

To be eligible, you must fit one of these descriptions:

• Individuals who have not previously owned a primary residence in the past three years. You can still qualify if you owned a home years ago but it was rented for at least three years.
• Qualified veterans or those discharged from the service under conditions other than dishonorable.
• Individuals buying a home located in any of these counties:
  • Adams
  • Douglas
  • Jefferson
  • Lancaster
  • Scotts Bluff

This loan also has household income limits that depend on the location of the property and the household size. Aside from that, there’s also a limit on the maximum purchase price, depending on the number of units and location.

The minimum credit score requirement is 640, with a maximum debt-to-income (DTI) ratio of 45%. But, if your credit score is at least 660, the DTI will be adjusted to a maximum of 50%.

The Welcome Home Program of the NIFA started on August 15, 2022, and is now available in rural Nebraska counties. For individuals residing in counties like Douglas, Sarpy, Washington, Cass and Lancaster, this loan program may not be available.

The Welcome Home Program is primarily designed for first-time homebuyers in Nebraska and repeat homebuyers who need down payment and closing cost assistance. There are income and purchase limits to the Welcome Home Program.

The NIFA household income limit is currently set at $145K, and the purchase limit is $427K. Homebuyers must live in the property as their primary residence within 60 days of the loan closing.

The minimum credit score requirement is 640, with a maximum DTI ratio of 45%. If your credit score is at least 660, your maximum DTI ratio is 50%. Homebuyers who do not have a credit score may still become eligible for a NIFA loan if other conditions are met.

Purchasing a home for the first time can be daunting and confusing. MoneyGeek answers the most commonly asked questions to assist you further.