Finding your dream home can be expensive, but with first-time homebuyer programs in New York, you might be able to save money on your down payment or monthly mortgage payments.
MoneyGeek helps you find the right opportunity for your situation, whether you're looking for zero down payment, low down payment or homebuyer loan programs in New York.
What Is a First-Time Homebuyer Program & How Can It Help?
For many New York first-time homebuyers, the largest expense they may face is the down payment on a home loan.
A down payment represents a part of the price of a home that you're required to pay upfront before you receive any mortgage funds. The size or percentage of a down payment can affect your monthly costs. Generally, the higher your down payment, the less you'll pay in monthly payments for the duration of your loan.
A down payment of 20% offers benefits, including flexibility and the ability to purchase a good property. However, for many people, this can present a challenge.
With first-time homebuyer programs, you can get help arranging financing that fits your budget. Several mortgage programs are available to qualified buyers in New York. For instance, zero-down-payment mortgages like USDA and VA loans and those with low down payments like conventional, FHA and FHA 203(k) loans. The state also offers first-time homebuyer programs specific to its residents.
Navigating the options for a home loan can be overwhelming, but finding the right program requires understanding your needs, background and goals.
Zero-Down-Payment Loan Programs
For first-time homebuyers, the two government-backed loans that don't require down payments are USDA loans and VA loans. These mortgages exist to help borrowers purchase a home with no money down at closing.
Home loans offered through the U.S. Department of Agriculture (USDA) are good mortgage options for potential homeowners. USDA loans are ideal for individuals with low to moderate income, those living in rural areas and with a low credit score.
The USDA offers three home loan programs:
- Section 502 Direct Loan Program offers direct loans to low- and very-low-income applicants.
- Section 502 Guaranteed Rural Housing Loan Program helps approved private lenders to provide loans to low- and moderate-income applicants.
- Section 504 Home Repair program provides financing for borrowers to repair, improve and modernize their homes. It helps low-income homeowners maintain safe and decent housing.
USDA home loans require applicants to meet certain income requirements and purchase a home in a rural area that is eligible for the loan program.
VA home loans are available to military members, veterans and their spouses. Private lending institutions issue VA mortgages, but the U.S. Department of Veterans Affairs (VA) guarantees them. That means each lender can determine their interest rate and down payment requirements.
One of the most appealing features of the VA mortgage program is its flexibility, which allows borrowers to own primary and secondary residences and construct or renovate their houses. You can also take out reverse mortgages with VA loans. Like USDA home loans, these mortgages offer zero down payment, have low credit score requirements and carry lower interest rates than conventional mortgages.
Additionally, VA mortgages do not require purchasing private mortgage insurance (PMI) as a condition for a conventional mortgage. The loans are assumable should you want to gift or sell a property.
Low-Down-Payment Loan Programs
Low-down-payment loan programs allow you to put down less than 20% on a home. FHA loans and conventional loans administered by Fannie Mae and Freddie Mac make it easier for first-time homebuyers to afford a mortgage.
Fannie and Freddie (Conventional) Loans
Conventional loans from either Fannie Mae or Freddie Mac are private mortgage loans that allow you to purchase a house even if you have unpaid taxes or student loans. Government-backed loans are less flexible in this regard.
Conventional loans require a down payment of between 3% and 20%, depending on the borrower's credit and financial situation. In general, conventional loans have the edge over federal home loans.
Private mortgage insurance is typically less expensive than premiums for loans covered by the Federal Housing Administration (FHA). Once you have paid 80% of the home value, you can cancel your PMI from your monthly payment, which reduces your insurance costs.
Borrowers may use conventional loans on second homes or rental properties, whereas FHA loans are limited to owner-occupied property.
FHA loans are a great choice if you're looking to buy a home with a low down payment and fewer restrictions. With FHA home loans, you need a minimum credit score of 500 and at least a 43% debt-to-income ratio. Applicants who qualify are required to make a down payment of 3.5%. All this makes FHA loans more accessible to the average borrower.
But nothing is guaranteed. One way to increase your odds is to improve your credit score, which can help you secure a lower down payment. FHA mortgages have lower loan limits for borrowers looking to finance finer things in life, be it fixtures or furniture.
These loans are regulated and insured by the Federal Housing Administration (FHA) and offered by private lenders. Therefore, lenders can provide mortgages at a smaller down payment since they assume less risk.
FHA 203(k) loan have fewer qualification requirements than other financing options. You can qualify with less than 3.5% down and have a lower credit score than conventional mortgages.
This loan program offers two loan types:
- Standard 203(k) loans - For extensive reconstruction or installation of handicap accessibility.
- Limited 203(k) loans - For repairs or purchases of major appliances like dishwashers. You can also use funds to purchase a completely new bathroom, kitchen and other structural improvements within the home.
Homeowners may get lower interest rates and longer repayment terms than traditional mortgages.
FHA 203(k) loans are great for borrowers who plan to make the home their primary residence. They are also ideal if you're looking to buy a house that needs improvements. Properties under the FHA 203(k) must meet energy efficiency and structural standards.
USDA loans: A zero-down-payment program for rural residences in an area with a population of no more than 35,000.
VA loans: Military members and their spouses qualify for assistance with zero down payment on homes.
Fannie & Freddie loans: These programs help borrowers secure loans with down payments as low as 3%.
FHA loans: Requirements are easier to meet, which makes them great for people with less-than-ideal credit histories.
FHA 203(k) loans: A viable program for people who wish to renovate a home.
New York Homebuyer Programs
New York offers several state-specific homebuyer programs to help first-time buyers.
State of New York Mortgage Agency (SONYMA)
For borrowers looking to buy their first home, SONYMA provides affordable mortgage loans as well as down payment assistance programs. This statewide program is available in New York to help more people obtain housing. Borrowers need up to 3% of the purchase price in verifiable cash or asset.
HomeFirst is a down payment or closing cost assistance program designed to make homeownership more affordable for eligible first-time homebuyers. Applicants who qualify for the program can receive up to $100,000 toward their down payment.
HUD resources NY
The Department of Housing and Urban (HUD) provides a resource center for affordable, accessible housing and supportive services.
FAQs for First-Time Homebuyer Programs in New York
To guide you through the homeownership process, MoneyGeek answers questions by first-time buyers in New York.
- Consumer Financial Protection Bureau. "How to Decide How Much to Spend on Your Down Payment." Accessed September 27, 2022.
- Consumer Financial Protection Bureau. "Conventional loans." Accessed September 27, 2022.
- Federal Housing Financing Agency. "Fannie Mae and Freddie Mac." Accessed September 27, 2022.
- Federal Housing Administration. "FHA Loan Requirements." Accessed September 27, 2022.
- Federal Housing Administration. "FHA Loans for First-Time and Second-Time Home Buyers." Accessed September 27, 2022.
- Office of the Comptroller of the Currency. "Community Developments Fact Sheet: FHA's 203(k) Loan Program." Accessed September 27, 2022.
- State of New York Mortgage Agency. "SONYMA Programs." 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 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 & Grants." Accessed September 27, 2022.
- U.S. Department of Agriculture. "USDA Income Limit Chart." Accessed September 25, 2022.
- U.S. Department of Veterans Affairs. "Purchase Loan." Accessed September 27, 2022.