First-Time Homebuyer Programs in Nevada

A home is one of the biggest investments that you can make. Sometimes, the huge expense can push people away, especially first-timers.

Fortunately, there are first-time homebuyer programs in Nevada that have manageable payment schemes. MoneyGeek lists various zero-down-payment, low-down-payment and state-specific Nevada homebuyer programs to help you pick the right loan program that fits your budget.

Homebuyers are generally expected to pay 20% of their home’s purchase price upfront as a mortgage down payment. Having sufficient savings to cover this expense affects the mortgage loan types and rates that you’ll qualify for. It also has an impact on the size of your monthly payments.

That said, not everyone can afford this significant upfront payment, especially first-time homebuyers.

If you’re in the market to buy a home but can’t meet the expected 20% down payment, there are several homebuyer assistance programs that you can explore. There are zero-down-payment federal homebuyer programs that are widely available across the country. For instance, USDA offers mortgages in qualifying rural areas, while VA loans cater specifically to military members and their families. In addition, there are homebuyer programs that are specific to the state of Nevada, such as the Home Is Possible and Home at Last programs, which can help to cover both down payment and closing costs.

There are two federal mortgage loans that do not require a down payment — namely, USDA and VA loans. These financial assistance programs can be a godsend to first-time homebuyers because they will let you purchase a home without any upfront payment at closing.

USDA home loans are provided by the U.S. Department of Agriculture through its Rural Development program to give low- and moderate-income borrowers in eligible rural areas a chance at homeownership. With these loans, homebuyers will enjoy competitively low fixed rates without having to worry about a down payment or credit score requirements.

The USDA offers three types of home loan programs. The Section 502 Direct Loan Program caters to low- and very-low-income applicants, the Section 502 Guaranteed Rural Housing Loan provides affordable housing loans to low- and moderate-income applicants through approved private lenders and the Section 504 Home Repair program allows homeowners to fund necessary home repairs, improvements and modernizations.

To be eligible, you must meet the income requirements for your area, use the property as your primary residence and purchase a property that is no more than 2,000 square feet in size and located in an eligible rural area with a population below 35,000.

VA home loans are offered by the U.S. Department of Veterans Affairs through private lenders. To qualify, a Nevada homebuyer must be either an active or retired military member or an eligible surviving spouse. Your eligibility will depend on your duty status, length of service, income and credit score. You must also be able to present a valid Certificate of Eligibility (COE).

Aside from having no down payment, a VA loan also comes with generous terms, very low rates, no loan limit, no private mortgage insurance (PMI) requirement, limited closing costs and no prepayment penalties.

Eligible homebuyers can use a VA home loan to purchase a single-family home or a condo in a VA-approved project. Alternatively, this loan can be used to build a new home, buy a home and improve it or add modern features to make a home more energy-efficient.

If you don’t qualify for a zero-down-payment loan, the next-best option is a low-down-payment program. The two types of home loans with low-down-payment options are conventional (or Fannie and Freddie) loans and FHA loans.

Conventional home loans, which are often referred to as Fannie Mae or Freddie Mac loans, are very popular options, especially for first-time homebuyers who don’t qualify for zero-down-payment loans. These are funded by private mortgage lenders but sponsored by the government, which is why they often have low interest rates and are available to most homebuyers.

These conventional loans allow first-time homebuyers to buy a property by making as little as a 3% down payment, although you’ll need to purchase private mortgage insurance (PMI) to protect your lender if you default on your loan.

That said, your actual required down payment may differ from the rock-bottom down payment requirement of 3%, depending on your personal circumstances, the property that you intend to purchase and the type of loan that you select.

To qualify for a conventional loan, you’ll need a debt-to-income (DTI) ratio of 50% or lower and a credit score of at least 620.

FHA loans are issued by private lenders but are insured by the Federal Housing Administration (FHA). Applicants will find that, compared to conventional loans, FHA loans tend to have fewer restrictions. The most noteworthy of these requirements are a low down payment of 3.5%, a minimum credit score of 500 and a maximum debt-to-income ratio of 56.9%.

Keep in mind, though, that meeting the FHA’s minimum requirements won’t necessarily mean your loan will be approved. Lenders will weigh your application against several criteria. For instance, a lower credit score that puts you in the subprime borrower category (500–579) will require you to make a down payment of at least 10%.

With an FHA loan, borrowers have the option of fixed interest rates for either a 15- or 30-year mortgage. Loan amount limits vary depending on where you live in the state.

If a brand-new home is out of your budget or the home you intend to buy is in serious need of improvements, an FHA 203(k) loan might be the solution. It allows homebuyers to both purchase a home and finance its renovation, which frees them from the hassle of applying for multiple loans.

There are two types of FHA 203(k) loans:

• Streamlined: This type offers fast approval but can only cover minor renovations because it is capped at $35,000.
• Standard: This option can cover major repair work costing over $35,000, but you must hire a consultant from the U.S Department of Housing and Urban Development (HUD) to oversee the entire renovation.

Interest rates on FHA 203(k) loans are primarily based on creditworthiness. For instance, borrowers with a credit score of at least 580 will qualify for a 3.5% minimum down payment, while those with lower credit scores will have to put in a minimum down payment of 10%.

Nevada has state-specific first-time homebuyer programs that are also worth considering.

The Mortgage Credit Certificate (MCC) Program of the Nevada Housing Division offers a federal income tax credit of up to 30% of the interest paid on a mortgage loan and is available to qualified first-time homebuyers.

Home Is Possible (HIP) provides interest-free financial assistance of up to 4% of the total down payment, which can also be used to cover closing costs. To qualify for these low, 30-year fixed interest rates, applicants must have a minimum credit score of 660, attend a homebuyer education program and pay a one-time fee of $759.

Home at Last provides financial assistance to cover both the down payment and closing costs of a 30-year fixed-rate mortgage through the Nevada Rural Housing Authority. This program isn’t limited to first-time homebuyers. To be eligible, you must have a minimum credit score of 640, a maximum debt-to-income ratio of 45% and an annual income of $150,000 or less. In addition, the loan must be used to purchase or refinance your primary residence.

Go over MoneyGeek’s answers to some of the frequently asked questions about first-time homebuyer programs in Nevada to guide you through this significant milestone.