It’s no secret that buying a home in the greater Washington DC area is a daunting task. Home values are high, and there are fewer homes for sale than there are buyers. Add to that the steep requirements for mortgage qualification, and it’s no surprise that many prospective home buyers of modest means find the process difficult or impossible.
However, there ARE federal, state, and local programs that can help first-time home buyers (and even seasoned buyers) who meet moderate or low-income requirements to find a path to homeownership.
- FHA loan – The Federal Housing Administration insures loans for borrowers with slightly lower credit scores, slightly higher debt-to-income ratios, or low down payments. You can qualify with as little as 3% down payment.
- USDA loan – If you don’t mind living outside of the urban areas, in a more rural setting, the USDA guarantees loans for low-income borrowers in certain rural areas.
- VA loan – Veterans can get mortgage assistance through the VA, which insures loans for eligible veterans and their families. VA loans have low down payments, as low as 0% for qualified borrowers, and many of the closing costs and fees are minimized. However, some borrowers may require a “funding fee”.
- Good Neighbor Next Door – This is a HUD program that provides assistance to first responders and teachers, to encourage home ownership in revitalization areas. The program provides a grant of up to 50% of the home’s list price.
- Fannie Mae or Freddie Mac – Fannie Mae and Freddie Mac loans are similar to FHA loans, in that these government entities guarantee the loans. Credit requirements are close to conventional loans, but you only need a 3% down payment to purchase a home.
- HomePath ReadyBuyer Program – Geared toward first-time home buyers, this program provides a grant of up to 3% of the sales price to cover closing costs. To qualify, you need to complete an educational course on homeownership, and purchase a home that has been foreclosed by Fannie Mae.
- Energy-efficient mortgage – EEMs are backed by the FHA or VA, and allow borrowers to roll the costs of energy efficiency upgrades into the mortgage. These upgrades can lower ownership costs over time by decreasing utility bills.
- FHA Section 203(k) – A “fixer-upper loan” backed by FHA, the Section 203(K) loan may be an option for home buyers who may not have a large down payment or funds for remodeling, but aren’t afraid of a little “sweat equity”. Appraisals may be based on the expected value of the home after repairs are made. You are basically borrowing the funds needed to make home improvements and necessary repairs, but it’s all rolled into one loan, which saves you money.
- Native American Direct Loan – The VA provides direct loans to eligible Native American veterans, to help them buy, renovate or build homes on federal trust land.
Virginia State Programs
- HOME ownership Down Payment Assistance Program (DPA) – Qualified families who are below 80% of the median income for the area, may receive a down payment assistance grant of $10K or $20K depending on qualifications to be used for a down payment. And additional grant of $2,500 can help offset closing costs. This program is available through local providers.
- Virginia Housing Development Authority (VHDA) Programs – The VHDA provides numerous programs from down payment assistance to tax credits and even loans to wounded veterans to make their homes accessible. They even offer direct loan programs, with varying options and requirements, including loans for lower credit scores or zero down loans.
- Virginia Individual Development Accounts (VIDA) Program – This program encourages savings and personal financial planning for low-income individuals. It provides matching funds, currently $8 for every $1 saved by prospective home buyers (up to $4,000), to be used for specific purposes, such as buying a home. The program is administered through local intermediaries, such as Habitat for Humanity and other community organizations.
Local Programs in Northern Virginia
- Arlington County – Offers various assistance programs, including a Moderate Income Home Ownership Program, which provides a deferred payment, zero-interest trust up to $25,000 for down payment assistance. This assistance is then repaid when the home is sold. There are also other programs available, including home improvement assistance, low interest loans, and homebuyer education.
- City of Alexandria – Offers various assistance programs, including a Moderate Income Home Ownership program, which provides deferred payment, zero-interest trust up to $30,000 for down payment assistance. This assistance is then repaid when the home is sold. There are also other programs available through set-aside units that are designated as perpetual affordable housing units, resale-restricted units, mortgage rate reduction programs, and even employee assistance for local government employees.
- Fairfax County – Provides first-time home buyer programs, which include below-market affordable dwelling units that are set aside for low and moderate income home buyers. These are typically condos and townhomes, and some may have restrictions or requirements on future resale and other covenants. Home buyers must meet financial requirements.
- City of Falls Church – Provides below-market affordable dwelling units that are set aside for low and moderate income home buyers. These are typically condos and townhomes, and some may have restrictions or requirements on future resale and other covenants. Home buyers must meet financial requirements.
Tags: Tim Pierson, Northern Virginia, Homeownership, First-time home buyers, Buyer Assistance Programs, Down Payment Assistance, Affordable Housing,