In the current real estate market of higher interest rates and home prices, a quick internet search of the term “first-time homebuyer” may lead you to be bombarded by a plethora of doom and gloom headlines regarding homeownership minus any solutions. If you fall into this category of buyers, you will walk away with the feeling that buying your first home will be impossible. However, there is light at the end of the tunnel.
The National Association of Realtors (NAR) just released some new statistics on the demographics of homebuyers in 2022. Even though the report revealed a decrease in the percentage of first-time home buyers from 34% in 2021 to 26% in 2022 ¹, this group still managed to purchase a whopping number of homes. NAR reported that as of October 2022, the annualized rate of existing home sales was a massive 4.43 million units ². This would mean first-time homebuyers snagged around 1.1 million homes if they represented 26% of homes purchased. So, if you thought buying your first home was an impossible dream, think again! With these figures, it's clear that buying a home as a first-time buyer is possible and happening on a massive scale!
One potential solution to helping you afford your first home would be to look into Down Payment Assistance (DPA) and other first-time home buyer programs. Over 2,000 DPAs exist nationwide and can help with your downpayment, closing cost, or both. For example, after a client used our free e-guide to prepare for homeownership, we were able to help them get almost $14,000 in downpayment and closing cost assistance after they realized the type of home they would prefer was outside of their budget. Were it not for the assistance program, they would have had to delay purchasing their home and either sign another 12-month lease or pay to break it while they worked to save additional money. Down payment assistance programs can help you get into your home faster!
There are many types of programs available for first-time buyers. Some options include:
1. The Chenoa Fund
This nationwide program can offer up to 3.5% of your home’s purchase price and is forgiven after three years. This fund would help you pay the 3% downpayment required for one of the first-time home buyer Conventional home loan programs or the 3.5% needed for FHA home loans. To qualify for the Chenoa fund, you would need a credit score of 620 or higher, a debt-to-income ratio of 45% or lower, and your income must be at or below 115% of the area median income (AMI) (Check your AMI here)
2. First-Time Home Buyer Grants in Georgia and Other States
Nearly every state will offer a downpayment assistance program. For example, Georgia Dream, a first-time homebuyer program in Georgia, offers assistance ranging from $7,500 to $10,000, depending on your situation. If you are a public protector, military, healthcare provider, or educator — or work for these industries — you can receive up to $10,000. The rules for each state program vary significantly and can change at any time, so it is best to check on each to understand those requirements. You can find more details on first-time home buyer programs in Georgia or your state here.
3. Fannie Mae Community Seconds and Freddie Mac Affordable Seconds
These are very similar programs. Both programs allow you to finance up to 105% of the sales prices to cover your closing costs and your downpayment. The Fannie Mae Community Seconds requires an income of 120% of the area's median income and a credit score of 640 or higher. The Freddie Mac Affordable Seconds requires a credit score of 660. A lender should be able to show you the ins and outs of each program to see which one will work best.
4. Portfolio Loans from Community Banks and Grants from Private Lenders
Community banks and private lenders such as Bank of America will offer programs and grants to help you as a first-time homebuyer. These programs vary and can include options for closing and/or downpayment expenses or perks such as no or reduced private mortgage insurance (PMI). PMI is additional insurance the bank charges when a buyer puts down less than a 20% downpayment. The elimination of PMI can save you several hundred dollars per month, depending on the price of the home and other factors. Keep in mind that each bank will have its specific requirements that you must meet to qualify. These conditions may be more challenging than what is typically seen with traditional home loans, so be sure to get clarity before applying. Applying before you are ready can result in a lower credit score, as it will be considered a hard pull which typically reduces your score.
5. The Biden $15,000 First-Time Home Buyer Tax Credit (Not Law Yet)
Although the First-time Homebuyer Tax Credit, sometimes called the First-Time Home Buyers Act, has yet to be written into law, it may be a future option. This program was created to help low and middle-income Americans become homeowners. The credit could be applied to your federal tax bill or refunded directly. However, the program requires you to stay home for at least four years to avoid paying back some or all of the credit received. But this should be easy to achieve given that the typical buyer in the Top 25 metro areas stays in their home for ten and a half years before selling³. Additional requirements include but are not limited to the following:
Must not have owned a home in the last 36 months
Must purchase from a non-relative
Debt to income less than 43-45%
Two-year employment history
Steady and reliable income
If the bill passes, it could be a great help to many who are interested in becoming homeowners. You can track the progress of this bill here.
It's time to turn your dream of owning a home into a reality! With abundant financial resources, such as grants and second mortgages, at your disposal, there's no reason to wait any longer. Don't let negative news hold you back - take charge of your future and check out this list of grants and downpayment assistance programs available in your state. We also recommend preparing for homeownership with our free e-guide, which will help you learn how to qualify for a mortgage and much more!! Remember, as Dale Carnegie said, "Inaction breeds doubt and fear. Action breeds confidence and courage." So, get up, get out, and start pursuing your dream of homeownership today!
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Denise Johnson, MBA, REALTOR®, is often referred to as a "Data Nerd" by family and friends and has a gift for seeing the important facts of a situation. She aims to fit all the pieces of the jigsaw puzzle together into a complete picture, making it easier for herself or anyone she counsels to make sound and rapid decisions.
After 10+ years of working for multiple Fortune 500 and 1000 companies across Logistics, Finance and Marketing, Denise made the leap into the Real Estate Industry, hoping to help others achieve their homeownership desires. She can remember purchasing her first home at the age of 23, and it being both a time of joy and stress because she didn't fully understand the process and the implications of owning a home. Since then, she has owned and sold multiple personal properties, including selling an investment home that turned from a Rehab to a New Construction project in 2020. She has a desire to share all that she has learned and continues to learn with future customers to tip the scales toward a joyous homeownership and home-selling experience.
When she is not busy finding solutions in business, she loves large get-togethers with friends and family, international travel adventures with her hubby, and growing her passion for gardening and cooking healthy recipes.
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¹ National Association of Realtors- Newsroom. Link to Article
² National Association of Realtors- Research and Statistics. Link to Article
³ First American Mortgage Solutions. Link to Data