How to Get Help Buying a Home

Here's what you need to know.

A smiling woman holds a notebook.

Many people put off purchasing their first home because they do not feel comfortable navigating through the process of buying a house, or perhaps because they feel they will not qualify for home financing or affordable home insurance. However, whether you are confused about the process, uncertain about what type of home is right for you, or unsure that you can meet financial requirements, there is plenty of help available to you. You just need to know where to look.

What Kinds of Help Can a Real Estate Agent Provide?

When you work with a real estate agent, you can obtain a great deal of assistance with buying your house. These agents are typically familiar with home prices, crime rates, schools and other neighborhood concerns in the areas in which they sell homes. Your agent can work with you to determine your housing and budgetary needs and can then recommend, and take you to see, a number of appropriate houses.

If you are a first-time homebuyer, there is likely a lot you do not yet know or understand about the house-buying process, such as how how to make a bid on a home, how far you can go when negotiating on a price, how much earnest money must be put down to secure the purchase and how to back out of a deal if a home inspection shows significant problems. Your agent can help you through every step of the process all the way until you close on the home and recieve your keys.

Where Can I Get Help if I Am Having Trouble Scraping Up a Down Payment?

The biggest stumbling block for many potential homeowners is in coming up with a down payment. Many lenders require you to put at least 10 percent down on a house, though financial advisors will tell you to put 20 percent down. This is because if you do not have at least 20 percent down, lenders will require you to pay for private mortgage insurance (also known as PMI) until you have paid enough toward your principal to have 20 percent equity in your home. This can add up to thousands of dollars lost.

If you qualify as a low-income or disabled resident, there are a number of national, state and local charitable foundations that may be able to help you with your down payment, some of which are listed later in this article. If you are working with a real estate agent, your agent might also be able to recommend some organization to which you can apply for financial assistance.

Another option you have is to get help from the seller of the home by engaging in a rent-to-own agreement. The way these programs work is that you and the seller draw up an agreement wherein you will rent the home for a number of years, during which a portion of each rent payment will go toward a down payment on the home. After an agreed upon number of years, typically 3 to 5, you will have built up enough and can then purchase the home.

Sarah Siddons and Chris Opfer of How Stuff Works advise that you should make sure you are entering into a clear and written contract with the leasing party. They also warn that if you choose not to buy the home after a couple of years, you will lose the money you have put toward the down payment. However, the rent-to-own system provides great help with buying a home for those who cannot afford a down payment.

Who Can Help Me if I Have Bad Credit?

Bad credit can lead to very high interest rates and even the inability to qualify for a mortgage. However, bad credit is not something that is impossible to overcome. There are a number of credit-counseling programs available throughout the United States that can help you learn to manage your money better and help you get on the road to a positive credit score.

Improving your credit is not something you can do overnight, but it can be done. If you have your sights set on homeownership in the future, this is something you should begin working on as soon as possible.

Elizabeth Weintraub reports that if you wish to buy a home now, while your credit is still bad, you may be able to get a conforming mortgage with decent terms and a higher-than-average interest rate. However, there is a waiting period before you can apply for such a conforming mortgage if you are recovering from certain financial setbacks such as these:

  • If you have applied for bankruptcy: A bankruptcy will show up on your credit report for 10 years, but you will be eligible to apply for a conforming mortgage after 4 years.
  • If a lender has foreclosed on you: If you owned a house in the past but went through a foreclosure because of missed payments, you may apply for a conforming mortgage after 2 years.

Be aware that some lenders will provide you with a mortgage in as little as six months after such an event. However they will often require as much as a 35-percent down and will charge you extremely high interest rates on a mortgage that comes with less-than-favorable terms. It is therefore a good idea to avoid predatory lenders such as these.


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Is Help Available for People with Low Incomes?

If you are one of the many people who fall into the category of low-income Americans, you may think that homeownership is only a pipe dream. However, there are programs available to help people in your situation purchase a home so you can begin to build equity with a home investment.

The U.S. Department of Housing and Urban Development recognizes that home ownership provides low-income Americans the ability to improve their financial situations and therefore offers programs to help those in need. Here are some programs administered by HUD:

  • Housing Choice Voucher Program: This program helps very low-income families, the elderly and the disabled purchase homes on the private market. The participant can choose any home to purchase and can then use housing choice vouchers to help offset the costs.
  • Federal Housing Administration mortgage loans: These mortgages are government-insured loans that require very low down payments. If your income qualifies you for an FHA loan, your credit will not play a large role in determining your interest rate, thus often allowing you to get a very favorable rate. The loans do take a while to process and have caps on how much you can borrow. In addition, the home you are purchasing must be worth the price you are paying for it. But these requirements rarely get in the way.
  • Zero Downpayment Act: This HUD program helps low-income, first-time homebuyers who qualify for an FHA mortgage and are unable to come up with a down payment for their first home.
  • American Dream Downpayment Assistance Initiative: With this program, qualifying first-time homebuyers in need may be eligible to have their down payment covered in full through this government grant.

There are also state- and local-government-run programs that may be able to provide you with assistance. We recommend turning to a HUD-Approved housing counseling program. There are many such programs available throughout the country. Through these programs, you can get information about all the opportunities and programs that are available to you, as well as assistance applying for a mortgage and help with buying a home.

What Programs Are Available to Veterans?

As a veteran, you should be able to qualify for a VA loan on your home. The VA loan program offers a number of advantages. For instance, you can qualify for a mortgage with a zero-percent down payment requirement and no mortgage insurance requirement. You will also typically qualify for lower interest rates. As an added benefit, many closing costs, appraisal fees and other fees will be limited, thereby saving you even more money.

Keep in mind that VA loans are for primary residences only and are limited to $240,000. In some parts of the country where housing costs are particularly high, this limit may be insufficient. Also, as pointed out by Chris Birk at Veterans United, the only acceptable co-borrowers on your loan are your spouse or another veteran. Therefore, if you want to buy a home with a sibling or a future spouse, you may not be able to include them as co-borrowers.

In addition to VA loans, a number of federal and charitable programs help disabled veterans buy or retrofit homes that are suitable to meet their needs. If you have a permanent disability as a result of your having served in the armed forces, one of these programs may be able to provide you with financial assistance.

Are There Programs To Help the Disabled Get an Appropriate Home?

There are many different programs available to help people who are permanently disabled. This is a partial list of such programs, as provided by Steve McLinden of Bankrate:

  • HUD housing programs: HUD, as mentioned earlier, can help subsidize your housing costs through vouchers. This program also provides housing counselors certified to help those with special needs find programs that can help them buy a house.
  • Social Security: If you are collecting disability payments through Social Security, you may be automatically eligible to receive help with housing-related expenses such as heating costs and home help services.
  • Habitat for Humanity: This volunteer organization helps by building homes designed for those with disabilities. You will need to apply to qualify for this help, which is limited. While there are no guarantees that they will elect to give you assistance, it is worth applying for.
  • State agencies: Many states provide funding or assistance to help disabled citizens with many of their housing costs or help with buying a home. You will need to check with your particular state to learn more.

Get on the Path to Homeownership Today

People take a lot of pride in homeownership, and we hope that you can soon join their ranks. Once you have purchased your home, you may want to speak with one of the many independent insurance agents within our network. These agents can help you find a great rate on a homeowners insurance policy that is right for you.

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