The process of becoming a homeowner can be difficult, especially for first-time homebuyers. Luckily, first-time homebuyer programs can alleviate some of the financial costs of purchasing a home. MoneyGeek's guide to Kansas first-time homebuyer programs will help you choose the program that best meets your specific needs.
What Is a First-Time Homebuyer Program & How Can It Help?
Before buying a home, you must evaluate how much you can put down as a down payment. Your down payment affects the mortgage type and amount you may qualify for. A larger down payment leads to lower monthly mortgage payments and vice versa. First-time homebuyer programs typically cover all or partial costs of the down payment and closing fees for a new house, which can help you secure a lower interest rate.
Many first-time homebuyers struggle to save for a down payment since the cost of living is constantly increasing. Fortunately, there are various loan programs available to assist you in financing a home. Some of them are government-backed loans, state-specific first-time homebuyer programs and down payment programs.
To qualify for these programs, you’ll need to meet several criteria. Federal homebuyer programs are only available to citizens or legal residents of the United States. Government-backed loans are also limited to certain people. For instance, only current or former military members are eligible for VA loans.
Similarly, state-specific programs are only available for the particular state's residents. Kansas has several homebuyer assistance programs, such as community housing programs and U.S. Department of Agriculture Rural Housing, as well as a first-time buyer program offered through Kansas Housing Resources Corporation (KHRC).
Whether federal or state-run, you should see if any of these cost-saving programs can help turn your dream of owning a home into a reality.
Zero-Down-Payment Loan Programs
With zero-down-payment loan programs, first-time homebuyers can purchase a property without making a downpayment. Only two government-backed loans, the USDA loan and the VA loan, are zero-down-payment loans.
USDA home loans are issued by the United States Department of Agriculture for eligible borrowers from rural areas with very low to moderate incomes. You won't need perfect credit or a down payment to qualify for their low rates.
USDA’s three distinct home loan assistance programs are:
- Low- and very-low-income applicants can get direct loans through the Section 502 Direct Loan Program.
- Low- and moderate-income borrowers can get loans through approved private loan lenders with the Section 502 Guaranteed Loan program.
- The Section 504 Home Repair program assists very low income homeowners in financing home improvements and repairs.
There are income limits set in place by the USDA for each county or state where their loans are offered. For instance, in Lawrence County, the maximum annual income for a direct loan recipient family of four is $75,600.
Your prospective home's area measured in square footage must be less than 2,000, and it must be in a rural location with a population below 35,000.
You can apply for VA home loans, underwritten by the United States Department of Veterans Affairs, from private loan lenders like banks. However, only military personnel, honorably discharged veterans and their qualifying surviving spouses are eligible for these loans.
VA loans are advantageous to those that qualify because they have no minimum credit score requirement, loan limit or down payment.
Additionally, VA loans do not require private mortgage insurance (PMI) while still providing cheap interest rates and minimal closing expenses.
The following VA loan types are offered:
- Home purchase loan
- Cash-out refinance loan
- Interest Rate Reduction Refinance Loan (IRRRL)
- Native American Direct Loan (NADL)
Your eligibility for a VA loan is based on your service duration, duty status and characterization of service. A COE or Certificate of Eligibility, proof of sufficient income and a satisfactory credit score are also required.
Low-Down-Payment Loan Programs
House-hunters who can only afford a smaller down payment of less than 20% may look into low-down-payment loans. Both conventional and FHA loans are available with lower down payment requirements.
Fannie and Freddie (Conventional) Loans
Among first-time homebuyers, conventional home loans tend to be the most common form of financing. They are widely available, offer low interest rates and are financed by private lenders. However, they typically have higher lending standards than loans backed by the government.
There are two main kinds of conventional home loans:
- Conforming loans correspond to Fannie Mae or Freddie Mac's established requirements.
- Non-conforming loans do not follow Fannie Mae or Freddie Mac’s requirements.
Depending on your financial profile, you can put down as little as 3% and still qualify for a conventional loan. However, you’ll need to purchase private mortgage insurance (PMI) to safeguard the lender from loss in the case of a loan default.
A minimum credit score of 620 is required for a conforming conventional loan, while a score of 700 is required for a non-conforming conventional home loan. Your debt-to-income (DTI) ratio should also be less than 45%.
Private lenders provide FHA loans because they know the loans will be guaranteed by the Federal Housing Administration (FHA). FHA loans feature more lenient requirements than conventional loans, such as a minimum credit score requirement of 500, a maximum debt-to-income ratio of 56.9% and a minimum down payment requirement of 3.5%.
However, simply meeting the FHA's minimum requirements will not guarantee you a loan. Furthermore, a down payment of 3.5% only applies if your credit score is 580 or above, while a down payment of 10% is necessary if it falls between 500 and 579.
FHA-approved applicants can choose between a 15- or 30-year fixed-rate loan period, with loan limits varying by state and county. To see how much of a loan you can qualify for, you may use the Department of Housing and Urban Development's (HUD) online tool.
The FHA 203(k) loan program may be right for you if you're interested in purchasing and renovating an older home. With this program, homebuyers can fund the purchase and renovation of a home under a single mortgage.
The Federal Housing Administration (FHA) offers the 203(k) loan program, which can be used to finance a wide range of renovation projects, including the home's structural alterations and reconstruction, health and safety hazards removal, renovation or modernization, repairing or reconditioning of plumbing network and the addition of accessibility features. Keep in mind that the property must meet the HUD-established minimum requirements for energy efficiency and structural integrity.
The lending criteria for FHA 203(k) loans are comparable to those of FHA loans. For applicants with a minimum credit score of 580, the required minimum down payment is 3.5%; for those with scores between 500 and 579, it is 10%.
Zero-down-payment loans: Using zero-down-payment programs, first-time homebuyers may purchase a house without putting any money down.
USDA loans: To qualify for a USDA loan, the home you intend to buy must be in a rural community with fewer than 35,000 residents.
VA loans: VA loans are only available to military members.
Low-down payment loans: Borrowers with smaller down payments (less than 20%) have access to both conventional and FHA loans.
Fannie & Freddie loans: A 3% down payment may be all that is required to qualify for a conventional or Fannie and Freddie loan.
FHA loans: FHA loans offer some of the most lenient requirements with regards to credit score, down payment and debt-to-income ratio criteria.
FHA 203(k) loans: With an FHA 203(k) loan, you can purchase and renovate your fixer-upper home.
Kansas Homebuyer Programs
In addition to federal financing, Kansas offers state-specific first-time homebuyer programs to help its residents fulfill the American dream of owning a home.
Kansas Homeowner Assistance Fund
The Kansas Housing Resources Corporation (KHRC) created the Kansas Homeowner Assistance Fund (KHAF) with funding from HAF. This helps Kansas homeowners who may need assistance paying their mortgage, property taxes, utility bills, homeowner association (HOA) dues and other homeownership-related expenses because of the Coronavirus epidemic. It provides up to $60,000 as a maximum assistance amount.
HUD Kansas Resources
HUD provides statewide and regional homeownership assistance programs for Kansas homebuyers. These include the Kansas Affiliates of Habitat for Humanity, Community Housing program, State of Kansas first-time homebuyers program and USDA Rural Housing programs.There are also county-specific homeownership assistance programs exclusive to those belonging to Lawrence and Topeka, and first-time home buyer assistance programs are available to the local residents of Leavenworth County.
FAQs for First-Time Homebuyers in Kansas
MoneyGeek provided answers to some frequently asked questions regarding the first-time homebuyer programs in Kansas to help you on your way to homeownership.
- CFPB. "Conventional Loans." Accessed September 22, 2022.
- Kansas Housing. "First-Time Homebuyer." Accessed September 22, 2022.
- Kansas Housing. "Kansas Homeowner Assistance Fund (KHAF)." Accessed September 22, 2022.
- Kansas Housing. "Kansas Homeowner Assistance Fund (KHAF) Program Fact Sheet." Accessed September 22, 2022.
- U.S. Department of Housing and Urban Development. "FHA Mortgage Limits." Accessed September 22, 2022.
- U.S. Department of Housing and Urban Development. "Homeownership Assistance: Kansas." Accessed September 22, 2022.
- U.S. Department of Agriculture. "Single Family Housing Direct Home Loans." Accessed September 22, 2022.
- U.S. Department of Agriculture. "Rural Development Single Family Housing Direct Loan Program." Accessed September 22, 2022.
- U.S. Department of Agriculture. "Single Family Housing Guaranteed Loan Program." Accessed September 22, 2022.
- U.S. Department of Agriculture. "Single Family Housing Repair Loans and Grants." Accessed September 22, 2022.
- U.S. Department of Housing and Urban Development. "203(k) Rehab Mortgage Insurance." Accessed September 22, 2022.
- U.S. Department of Veterans Affairs. "VA Home Loans." Accessed September 22, 2022.