Federal grants can be an important source of funding for the first time home buyer. Unlike a loan or mortgage, a grant does not have to be repaid, which means these programs are targeted to areas where the government wants to invest in the revitalization of a community.
Federal Home Buyer Grants
We're going to start this topic by explaining the current operating model for federal grants. The federal government does not make housing grants available directly to individuals or families. However, they do make these grants available to states, and certain cities, that are then responsible for distributing the funds to its citizens.
Grants for First Time Home Buyers
Most federal grants are targeted to the first time home buyer, and they are intended to help those same individuals get started towards home ownership. These grants should not be expected to cover a large percentage of the new home's cost. In fact, most cover less than 10% of the home's value, or can be expected to only help pay for certain expenses such as closing costs.
Since home buyer grants are meant to be used towards the purchase of a new home, there are qualifying rules for these funds. Generally, grants will not be given to anyone that cannot qualify for a mortgage.
Finally, all federal grant programs aimed at first time home buyers will require the individual to attend a HUD-approved house counseling class. These classes help to prepare individuals for home ownership by assisting them in the process of getting their finances in order. By doing so, these individuals stand a greater chance of qualifying for a mortgage. For example, simple courses in home economics or household budgeting are important to the financial success of the individual, and achieving the grant program's goals.
HUD has a complete inventory of house counselors on their website. Information for all 50 states can be found here.
American Dream Grant
The American Dream Downpayment Initiative (ADDI) was a federal grant program that was signed into law in late 2003. This was perhaps the most generous grant program run at that time. In fact, the American Dream Downpayment Assistance Act authorized up to $200 million in grants each year, and the program was set to run through 2008.
The ADDI program was created to help low-income, first time home buyers, to purchase new homes by providing funding for down payments, closing costs, and some rehabilitation projects. ADDI program assistance was limited to the greater of $10,000 or six percent of the home's purchase price.
HOME Investment Partnerships Program
HOME is the largest Federal block grant to state and local governments. The program is designed exclusively to create affordable housing for low-income households. Each year, the HOME Investment Partnership Program allocates approximately $2 billion among the states, as well as hundreds of localities throughout the United States.
Households that are eligible for HOME assistance vary according to the nature of the funded activity. For rental housing and rental assistance, at least 90% of benefiting families must have incomes that are no more than 60% of the HUD-adjusted median family income for the area. For rental projects with five or more assisted units, at least 20% of the units must be occupied by families with incomes that do not exceed 50% of the HUD-adjusted median. In addition, the incomes of households receiving HUD assistance must not exceed 80% of the area median.
Additional Home Grant Programs
More information on these programs can be found by visiting the HUD website. This includes information on Community Development Block Grants (CDBG), American Dream Downpayment Initiative (ADDI), Emergency Shelter Grants (ESG), HOME Investment Partnerships Program, and Housing Opportunities for Persons with AIDS (HOPWA).
HUD also offers access to programs offered by state and local governments, as well as other housing assistance organizations. For example, it's possible to find local contact information for such programs as Habitat for Humanity. Local assistance programs are usually listed for each county.
203(b) Mortgage Insurance
HUD also provides access to a mortgage insurance program for qualifying individuals. The mortgage must be obtained from a private lending institution such as a bank, savings and loan, or traditional mortgage company. Under this program, the mortgage will then be insured by HUD.
Eligibility requirements for this program include:
Limits apply to mortgages in each state, for more information on local area programs, visit HUD's mortgage insurance website.
About the Author - First Time Home Buyer Grants
Copyright © 2005 - 2013 Money-Zine.com
|Money-Zine.com copyright 2004 - 2013|