The home-buying process can be both exciting and demanding. However, finding financial support through Louisiana first-time homebuyer programs can help streamline the process. MoneyGeek’s comprehensive guide analyzes the many home loan programs available in Louisiana to help you find the most suitable program for your specific circumstances.
What Is a First-Time Homebuyer Program & How Can It Help?
When securing a loan, homebuyers are expected to pay an up-front amount called a down payment. Your down payment amount will determine the size and terms of your mortgage. For example, larger down payments result in lower monthly payments.
However, down payments can be as much as 20% of the home’s purchase price, a hefty amount. Thankfully, first-time homebuyers in Louisiana who cannot come up with the required down payment have access to several government assistance programs. These include government-backed loans, state-specific plans, down payment assistance and below-market purchasing programs.
Homebuyer assistance programs put first-time homeownership within reach for many. Some options might not demand repayment, while others come with reduced interest rates.
Each homebuyer program has different eligibility requirements. For instance, VA loans are only available to military members, veterans and their families. In Louisiana, residents have unique access to state-specific homebuyer programs.
MoneyGeek's analysis of Louisiana first-time homebuyer programs might assist you in choosing the one that best meets your requirements.
Zero-Down-Payment Loan Programs
Getting a no-down-payment mortgage, such as a VA or USDA loan, enables you to buy a home with no down payment.
USDA loans are intended mainly for borrowers who do not qualify for a conventional loan. They offer financial assistance to prospective low-to-moderate-income homebuyers throughout the United States, including Louisiana. The program offers three funding options:
- Home improvement grants and loans: Provide homeowners with the funds essential for home renovations and repairs.
- Loan guarantees: Enable borrowers to access low mortgage interest rates without a down payment.
- Direct loans: Assist low- and extremely low-income borrowers.
Your USDA loan eligibility may differ depending on the county in which you reside. For instance, homebuyers in Acadia Parish, Louisiana, can get a single-family house loan with a $336,500 maximum limit if they meet certain requirements.
Private lenders in Louisiana offer VA loans backed by the U.S. Department of Veterans Affairs.
VA home loans are among the most well-known types of financial aid for military members. Among the eligible candidates are active military personnel, veterans and family members who fulfill the loan's requirements.
The absence of a down payment requirement is a fundamental advantage of VA loans, making them a better choice than conventional home loans.
VA loan requirements are more lenient than those for other loan programs. However, you’ll need a Certificate of Eligibility (COE) before applying.
The types of VA home loans include:
- Native American Direct Loan (NADL)
- Home purchase loan
- Interest Rate Reduction Refinance Loan (IRRRL)
- Cash-out refinance loan
Low-Down-Payment Loan Programs
You can buy a home with a small down payment if you qualify for low down payment loans, such as conventional and FHA loans.
Fannie and Freddie (Conventional) Loans
Fannie and Freddie (conventional) loans, the most common type of mortgage, are not affiliated with a specific government program. Although they may be more challenging to obtain, conventional loans are typically more affordable than FHA loans.
Conventional loans have two primary categories: conforming loans and non-conforming loans. The government sets the maximum conforming loan amounts. Fannie Mae and Freddie Mac, the firms that underwrite conforming loans, create additional conditions for conforming loans.
On the other hand, non-conforming loans have fewer predetermined restrictions. Eligibility, rates and coverage for non-conforming loans might vary significantly among private lending organizations.
The percentage required as a down payment can also vary significantly among lenders. Most loans will also require private mortgage insurance to protect the lender in the event of default.
FHA loans are government-backed, private home loans with fixed terms of 15 or 30 years. They expedite the homeownership process for borrowers with bad credit who cannot obtain conventional loans.
Most FHA loans with a down payment of less than 20% require the purchase of private mortgage insurance (PMI), which consists of a one-time payment and payments made monthly. Mortgage insurance can increase the long-term cost of an FHA loan.
Your down payment amount may vary depending on your credit score. For instance, individuals with credit scores between 500 and 579 will need to put down a minimum of 10%, whereas those with scores of 580 or higher only need to put down 3.5%.
Borrowers can use the Department of Housing and Urban Development's online tool to determine the maximum loan amount for which they are eligible.
The FHA 203(k) loan program is a great option for borrowers purchasing homes that need work. Amounts vary by location, but typically the loan consists of a purchase price and a separate renovation amount.
Homeowners can use an FHA loan to finance various home improvement projects, including roof repair and installation, floor repair and installation, health and safety hazard removal, home energy efficiency enhancement, structure upgrades, landscaping and many more.
FHA 203(k) work must start within 30 days of the loan closure and be finished within six months.
Zero-down-payment loans: Offer reduced interest rates, but approval might be difficult.
USDA loans: Your projected income level must be less than 115% of the average household income in your location to qualify.
VA loans: Available to active duty service members, veterans and their qualifying family members. Applicants must include a Certificate of Eligibility with their application.
Conventional loans: Rates vary depending on property type, loan size and amount of down payment.
FHA loans: Offered by private lenders with more accommodating credit score and down payment criteria.
FHA 203(k) loans: Finances home purchase and any necessary repairs.
Louisiana Homebuyer Programs
In addition to federal housing loans, you may qualify for first-time homebuyer programs in Louisiana to help finance your home purchase.
Direct Homebuyer Assistance Program
The Direct Homebuyer Assistance Program provides qualifying first-time homebuyers with down payment and closing fee assistance. Homebuyers' access to subsidies fills the gap between the cost of a home's purchase and the maximum initial mortgage loan amount.
The Home Investment Partnership Act Program
The Home Investment Partnership Act Program allocates funds for housing repair and for supporting first-time homebuyers. Each Louisiana city must match 25% of all local program-funded projects.
Louisiana Housing Corporation Programs
The Louisiana Housing Corporation offers a wide range of homeownership programs to help low- and moderate-income homebuyers accomplish their dream of house ownership. The programs provide a selection of 30-year fixed-rate mortgages, some with interest rates below the market average.
FAQs for First-Time Homebuyers in Louisiana
MoneyGeek answered frequently asked questions regarding first-time homebuyer programs in Louisiana to help you make an informed decision.
- USDA. "Rural Development Single Family Housing – Area Loan Limits." Accessed September 26, 2022.
- USDA. "Single Family Housing Guaranteed Loan Program." Accessed September 26, 2022.
- VA. "VA Home Loans." Accessed September 26, 2022.
- CFPB. "Conventional Loans." Accessed September 26, 2022.
- HUD. "Loans." Accessed September 26, 2022.
- HUD. "The Section 203(k) Loan Program." Accessed September 26, 2022.
- City of New Orleans. "Direct Homebuyer Assistance Program." Accessed September 2, 2022.
- City of Kenner. "The Home Investment Partnership Act Program." Accessed September 26, 2022.
- Louisiana Housing Corporation. "Homeownership." Accessed September 26, 2022.