First-Time Homebuyer Programs in Idaho

Navigating the homebuying process for the first time can feel overwhelming. Fortunately, first-time homebuyer programs in Idaho can help alleviate some financial impacts of homeownership. MoneyGeek researched the different types of first-time homebuyer programs in Idaho to help you select the best option based on your situation.

When considering purchasing a home, it’s best to review the total expenses involved, one of which is your mortgage down payment.

A mortgage down payment is a significant cost factor in your homebuying process. Typically, it’s best to make a higher down payment so your monthly payments and interest rates are lower.

Down payments are generally 20% of the total cost of your home, which may not be financially feasible for some. Luckily, there are several first-time homebuyer programs that eliminate or reduce the cost of your down payment.

Federal zero-down-payment loan programs, like USDA and VA loans, require no down payment for qualifying applicants, while low-down-payment loan programs include conventional, FHA and FHA 203(k) loans. Idaho also has many statewide loan programs, including the Idaho Housing and Finance Association First Loan Program.

While there are many options, the best homebuyer program for you will depend on your financial background and preferences.

With zero-down-payment loan programs, homebuyers aren’t required to provide a down payment. These include USDA and VA loans.

USDA loans best fit individuals who live in qualified rural areas. Homebuyers can apply for one of the following three USDA loans through the U.S. Department of Agriculture and its Rural Development Guaranteed Housing Loan program:

• The Section 502 Direct Loan Program provides loans directly to low- or very-low-income applicants.
• The Section 502 Guaranteed Rural Housing Loan facilitates select lenders to provide loans to low- and moderate-income applicants.
• The Section 504 Home Repair program assists homeowners in financing home repairs, improvements and upgrades.

Idaho homebuyers may be eligible for these loans if the home to be purchased will be their primary residence, is located in a rural area with a population less than 35,000, and is less than or equal to 2,000 square feet.

USDA loans have a fixed rate of 1% and a repayment period of 20 years. Homebuyers may consider this type of loan because of its low origination fee (2% of the loan amount) and no down payment requirement.

Current and former military members and their families may fare best with VA loans, another zero-down-payment loan option. These loans are offered by the U.S. Department of Veterans Affairs through private lenders to qualified, aspiring homeowners.

Interested homebuyers may be eligible if they meet the minimum requirements regarding their credit score, income and property. VA loans can be used to purchase a single-family home or a condominium, as well as to fund the construction of a new home.

VA loans offer many benefits, like no prepayment penalty fee, no private mortgage insurance (PMI) requirement, reasonable terms, lower rates and reduced closing costs. However, VA loans require homebuyers to pay a one-time VA funding fee.

Idaho homebuyers can also consider low-down-payment loan programs as another option. This loan program lets you purchase homes with a down payment of less than 20% of the total cost. You can choose between Fannie and Freddie (Conventional) or an FHA loan.

Conventional loans, also known as Fannie and Freddie loans, are private mortgages that aren’t government-backed. They're widely available, and requirements depend on the lender.

A Fannie Mae or Freddie Mac loan suits homebuyers who haven’t complied with federal obligations, like filing taxes, which can disqualify them for government-backed loans.

Generally, the required down payment is 20%, but some lenders permit a down payment of 3%. This lower rate provides more opportunities for individuals to buy their homes.

This kind of loan requires a minimum credit score of 620 and a debt-to-income ratio of 45%. Because requirements vary by lender, MoneyGeek recommends shopping around and comparing quotes to find the ideal lender for your situation.

The Federal Housing Administration (FHA) offers FHA loans through private lenders. This loan best suits individuals with incomplete credit records and histories.

FHA loans usually require a minimum credit score of 500, a minimum down payment of 3.5% and a debt-to-income ratio of 56.9%. These loans typically feature a fixed interest rate and repayment terms of 15 or 30 years.

However, this loan has limitations based on the county and state you live in. FHA loans may also require more documents, and not all properties qualify. Additionally, an upfront fee of 1.75% of the loan amount is required from all borrowers.

An FHA 203(k) loan combines a standard mortgage and a home improvement loan. This loan is best for homebuyers interested in purchasing and renovating an older home.

Two types of FHA 203(k) loans are offered: standard and streamlined. Standard 203(k) loans are used for major structural overhauls, like adding rooms or modifying plumbing. Streamlined 203(k) loans suit homebuyers making simple renovations like new flooring or minor room remodeling.

To qualify for this loan, you need a minimum credit score of 500 to 580, a down payment of 3.5% and a front-end debt-to-income-ratio of 31% or less. Remember, this loan is exclusive to the homebuyer’s primary residence.

While some aspiring homeowners may not qualify for federal loan programs, there are several state-specific loan programs available in Idaho.

The Idaho Housing and Finance Association First Loan Program offers down payment and closing cost assistance on its loans. Qualified home buyers can receive assistance for up to 7% of the total cost of the down payment.

Individuals can receive a maximum of $2,000 or 35% of the total mortgage interest paid in income tax credits for every year of the life of the loan.

Available in 34 counties in Idaho, homeownership vouchers offset monthly homeownership expenses. Interested homebuyers may qualify if they meet the HUD income guidelines and pay around 30% of the adjusted gross monthly income for rent. Individuals can also choose their housing if it meets the program requirements.

NeighborWorks Boise is a not-for-profit mortgage broker that offers first-time homebuyers low-interest mortgage products in Idaho. It provides down payment assistance, refinancing options and conventional loans.

With a down payment of $1,000 or less, NeighborWorks Boise provides 100% financing and down payment assistance through different state programs that may not be offered by other mortgage lenders.

Purchasing your first home can be scary and challenging. MoneyGeek answers the most commonly asked questions to help you make a well-informed decision.