Buying your first home can be daunting and overwhelming. Luckily, there are several ways to help reduce homebuying stress. MoneyGeek analyzed available options to help you find the best Georgia first-time homebuyer programs for your situation.
What Is a First-Time Homebuyer Program & How Can It Help?
First-time homeowners face difficulties like slow pay growth, increased living expenses, bad or no credit history and skyrocketing property values. Fortunately, several loan programs are available to assist you in buying a home. These include government-backed loans, down payment assistance and state-specific first-time homebuyer programs.
Keep in mind that applicants in federal homebuyer programs must be U.S. citizens or permanent residents. But not everyone is eligible for loans secured by the government. For instance, VA loans are only available to military personnel, veterans and their families. Meanwhile, only low-income people in qualifying rural regions can apply for USDA loans. It's important to note that Georgia's first-time homebuyer programs are specific to its residents.
A down payment is the amount you pay toward a house, and it is typically due when your mortgage loan closes. The type of mortgage and loan amount you may get from a lender depends on your down payment. A larger down payment often indicates that you are a less risky borrower, which could lower your interest rate. That makes your monthly payment consequently less.
Zero-Down-Payment Loan Programs
First-time homebuyers may buy a property with no money down at closing, thanks to zero-down-payment loan programs. The only two big financing options that allow you to purchase a home with no down payment are USDA and VA loans.
The U.S. Department of Agriculture issues USDA loans to potential homebuyers. These mortgages support borrowers living in low- to moderate-income households from certain rural regions. With a USDA home loan, you don't have to worry about a down payment or minimum credit requirement. The rates are relatively cheaper too.
If you qualify for a loan, you may use the funds to buy land and prepare it for construction, build a home, renovate or move a house.
USDA mortgages help low- and very-low-income applicants who can apply for direct loans under the Section 502 Direct Loan Program. With the help of the Section 502 Guaranteed Rural Housing Loan, qualified private lenders can lend money to low- and moderate-income borrowers. The Section 504 Home Repair Program offers financial assistance to homeowners to renovate, repair or modernize their homes.
While the U.S. Department of Veterans Affairs backs VA mortgages, a private lender issues them. VA home loans are often only available to active duty military personnel, honorably discharged veterans and qualified surviving spouses. Eligible borrowers can use the funds to purchase, construct, maintain, repair or alter a property for personal use.
The VA home loan program offers the loans offer the following: Purchase Loans Native American Direct Loan (NADL) Adapted Housing Grants Interest Rate Reduction Refinance Loan (IRRRL)
A VA loan is an excellent choice due to its advantages over other home loan choices. For instance, there's no minimum credit score, no down payment requirement and no loan limits. Additionally, you don't need to purchase private mortgage insurance. VA loans also have competitively cheap interest rates.
Low-Down-Payment Loan Programs
Low-down-payment mortgage loans may allow you to purchase a home with less than a 20% down payment. Conventional and FHA loans are two types of mortgages with a low down payment.
Fannie and Freddie (Conventional) Loans
Conventional home loans often fall into two categories:
- Conforming loans have maximum lending restrictions imposed by the government. They adhere to regulations set by Fannie Mae or Freddie Mac.
- Non-conforming loans are too big to be classified as conforming. They lack standardization and do not adhere to Freddie Mac or Fannie Mae regulations. Requirements, fees and features may vary significantly across lenders.
Generally, conventional loans offer cheap rates and are readily available since private mortgage lenders sponsor them. They have stricter eligibility requirements in exchange.
The U.S. Department of Housing and Urban Development (HUD) does not directly provide financing to homebuyers. However, lenders licensed by the Federal Housing Administration (FHA) do so to participate in various FHA loan programs.
An approved lender will issue mortgage loans to borrowers who plan to dwell in the property and can fulfill the down payment, mortgage payments, eligibility criteria and credit standards.
Eligible borrowers can pick between 15- and 30-year terms with fixed interest rates, with the maximum loan size determined by their state and county. You can use an online calculator provided by the HUD to determine the maximum loan amount.
An FHA 203(k) loan offers homebuyers a choice to fund the renovation of their current home, finance the cost of buying (or refinancing) property and its renovation or both.
Interim purchase and renovation loans frequently feature balloon payments, quick payback durations and higher interest rates. However, FHA 203(k) loans provide a solution that benefits lenders and borrowers alike. They guarantee a single, lengthy loan with a fixed or adjustable rate that pays for the purchase and renovation of a home.
Because there is no maximum loan amount, standard 203(k) loans are ideal for borrowers who need to fund substantial structural upgrades. That may include large roof repairs, room extensions or plumbing replacements. You can get up to $35,000 from limited 203(k) loans, which makes them perfect for minor maintenance or aesthetic upgrades like new flooring, modest kitchen renovations or gutter repairs.
USDA loans: The USDA requires that the house you intend to buy must be in an eligible rural region.
VA loans: The U.S. Department of Veterans Affairs backs VA loans, which provide special mortgage advantages to qualified service members, veterans and their spouses.
Conventional loans: While harder to obtain, conventional loans are often less expensive than FHA loans.
FHA loans: Less strict requirements for a credit score, debt-to-income ratio and down payment.
FHA 203(k): HUD stipulates that buildings financed by this loan must adhere to particular structural and energy efficiency standards.
Georgia Homebuyer Programs
Georgia first-time homebuyer programs are solely available to state residents. They provide another choice for financing your first home purchase outside government-backed loans.
Georgia Dream Homeownership Program
The Georgia Dream Homeownership Program offers down payment assistance that you must pay back upon the sale or refinancing of the home. Lenders looking to provide an affordable mortgage can check out the Georgia Department of Community Affairs (DCA), which serves as the secondary market.
Homestretch Down Payment Assistance Program
The Homestretch Down Payment Assistance Program helps Georgia income-eligible homebuyers who are capable of making a purchase but lack the funds for a down payment. Qualified borrowers who have lived in the property as their primary residence for at least five years can benefit. The program offers down payment assistance of up to $7,500 in the form of a five-year deferred payment loan with 0% interest.
HUD Resources GA
Homebuyers in Georgia can access several state and local homeownership assistance programs through the HUD. These include the Community HOME Investment Program, Habitat for Humanity and the Georgia Dream Homeownership Program.
FAQs for First-Time Homebuyers in Georgia
MoneyGeek has answered some commonly asked concerns to help first-time homebuyers in Georgia become homeowners.
- Consumer Financial Protection Bureau. "Conventional Loans." Accessed September 27, 2022.
- Georgia Department of Community Affairs. "Georgia Dream." Accessed September 27, 2022.
- Gwinnett County Board of Commissioners. "Homestretch Down Payment Assistance Program." Accessed September 27, 2022.
- GovLoans.gov. "Basic FHA Insured Home Mortgage." Accessed September 27, 2022.
- U.S. Department of Agriculture. "Single Family Housing Direct Home Loans." Accessed September 27, 2022.
- U.S. Department of Agriculture. "Single Family Housing Guaranteed Loan Program." Accessed September 27, 2022.
- U.S. Department of Agriculture. "Single Family Housing Repair Loans and Grants." Accessed September 27, 2022.
- U.S. Department of Housing and Urban Development. "203(k) Rehab Mortgage Insurance." Accessed September 27, 2022.
- U.S. Department of Housing and Urban Development. "FHA Mortgage Limits." Accessed September 27, 2022.
- U.S. Department of Veterans Affairs. "VA Home Loans." Accessed September 27, 2022.
- U.S. Department of Housing and Urban Development. "Homeownership Assistance." Accessed September 27, 2022.