Both the federal government and Utah Housing Corporation sponsor first-time home buyer programs and down payment assistance to help Beehive State settlers achieve homeownership. Some cater to low-income individuals with less-than-ideal credit scores. Others are designed specifically for public service professionals like teachers, police officers and firefighters. If you want some help deciding which of the below programs is right for you, our SmartAsset advisor matching tool can help. It connects you with up to three nearby financial advisors who know how to manage the costs of homeownership and balance the rest of your financial responsibilities accordingly.
Federal First-Time Home Buyer ProgramsFHA Loans Pros – Low down payment required
– Don’t need a high credit score Cons – Larger down payment needed for those with a credit score below 580 Eligibility – Credit score of at least 500
– At least 3.5% down payment Best For – Anyone that doesn’t have great credit history or enough money for a down payment
The Federal Housing Administration backs FHA loans, which are a great option for borrowers that lack the upfront funds needed to purchase a home. Rather than the typical 20% down payment, FHA loans only require you to provide 3.5% of your home’s value at the time of purchase.
However, to receive this perk in its full glory, you must have a FICO® credit score of 580 or above. If yours is lower, you’ll need to make closer to a 10% down payment. At half the size of a typical mortgage down payment, that’s still a pretty good deal! In fact, even with the credit score requirement, an FHA loan is one of the easiest federal programs to qualify for.
VA Loans Pros – Up to 100% loan coverage
– No private mortgage insurance required
– Usually come with lower closing costs than conventional loans Cons – Must pay a VA funding fee
– Long application process Eligibility – For current or former military members, spouses, or other beneficiaries
– Credit score of at least 620 Best For – Veterans without the income or savings to cover a typical down payment
The Department of Veterans Affairs insures VA loans, which help veterans without adequate income or savings to afford a typical 20% down payment. As such, they do not require any sort of down payment. This is essentially impossible to replicate outside of a VA loan, making it all the more valuable of a proposition.
Plus, since the government will back part of your risk, you won’t have to get the usually obligatory private mortgage insurance (PMI). Closing costs are also usually lower than they are with conventional and other mortgages.
In most situations, you need a FICO® credit score of at least 620. You also need to pay a VA fee, which ranges anywhere from 1.25% to 2.4% of your home’s value depending on whether or not you pay a down payment.
USDA Loans Pros – No down payment required
– Can be approved even with a low credit score Cons – Not available if you can qualify for a conventional mortgage Eligibility – Income within 115% of the adjusted U.S. median
– Home must be in an eligible rural area Best For – Low- to mid-income borrowers willing to live in the country
Legally known as a “Section 502 Single Family Housing Guaranteed Loan Program,” the United States Department of Agriculture (USDA) backs USDA mortgages to attract new home buyers to rural and semi-rural places throughout the country. In most cases, you won’t even have to pay any down payment.
If your credit score falls a bit lower on the FICO® spectrum, you may have to pay a down payment of roughly 10%, which is still a considerable discount from the typical 20%. Keep in mind that you must earn less than 115% of the U.S. median income and have been denied a conventional loan to qualify.
Good Neighbor Next Door Program Pros – 50% lowered home cost
– Ability to sell the home and retain all equity after three years Cons – Not available in most areas
– Not available to most people Eligibility – For firefighters, police officers, emergency medical technicians or teachers
– Must remain in the home for at least three years after purchase Best For – Teachers and public servants without enough savings to buy a home
The Good Neighbor Next Door Program is one of the more unique federal mortgage offerings on the market. Only emergency personnel and pre-K through 12th-grade teachers can apply. Though not really a loan, it offers a flat 50% discount on the home’s value. Participants are encouraged to get a conventional, VA or FHA mortgage to pay for the home, but they can also pay cash.
In order to save half off your home, it must be located within a “revitalization area” as titled by the Department of Housing and Urban Development (HUD). You must also agree to make the home your primary residence for at least three years. So long as you meet these terms, you can sell the home and hold onto any equity and profit once the three years are up.
Fannie Mae/Freddie Mac Pros – Low down payment required
– Don’t need any credit history in some instances
– Various loan styles available Cons – May carry higher interest rates than other federal programs Eligibility – Income requirements dependent on the home’s location Best For – Anyone who doesn’t qualify for other federal programs, but needs a discount on the upfront costs of homeownership
Freddie Mac and Fannie Mae are government-sponsored mortgage lenders. While technically two different entities, they offer very similar programs suitable for anyone buying their first home.
Home Possible® mortgages from Freddie Mac come in either “Home Possible: 95% LTV” or “Home Possible Advantage: 97% LTV” versions. LTV stands for loan-to-value, meaning required minimum down payments will be 5% and 3%, respectively. These loans can be for 15 or 30 years an carry 5/5, 5/1, 7/1, or 10/1 adjustable-rate terms. The standard option is available even to those without a credit history. Home Possible Advantage mortgage is essentially the same, but it has credit requirements and can only come with fixed rates.
The HomeReady® loan from Fannie Mae, on the other hand, requires down payments as low as 3%. Borrowers need a FICO® credit score of 620 or above for this one. They also must make an income at or near the U.S. median. With both Home Possible® and HomeReady® loans, you must have private mortgage insurance at the time of purchase, though you can cancel it once you’ve accrued 20% equity in your new home.
NADL Pros – No down payment required
– Can be approved with a very low credit score
– No private mortgage insurance required
– Usually come with lower closing costs than conventional loans Cons – Not available in all areas
– Not available to most people Eligibility – For current or former military members of Native American descent, their spouses, or other beneficiaries
– Only for homes located on allotted lands, Alaska Native corporations, Pacific Island territories, or federally-recognized trusts Best For – Native American veterans that can’t afford a typical down payment
A Native American Direct Loan (NADL) is another mortgage program backed by the Department of Veteran Affairs. It comes with impressive perks, like 0% down payment and a set interest rate. The interest rate currently sits at 4.5%, though that is subject to change based on market and Prime Rate fluctuations.
Don’t worry if you have a poor credit record. NADLs have very low credit requirements. They also eliminate the need for private mortgage insurance, a benefit that extends from normal VA loans. In an effort to cut down on the extra expense that closing costs can create, the VA has significantly lowered those as well.
Utah First-Time Home Buyer Programs FirstHome
Pros – Low down payment required
– Competitive interest rates
– A second loan for up to 6% of the original loan value Cons – Second loan has higher interest rates Eligibility – Credit score of at least 660
– Income and purchase price limits dependent on home location Best For – Anyone with limited income and a decent credit score who can’t afford a typical down payment
FirstHome mortgages from the Utah Housing Corporation (UHC) have the lowest interest rates of any UHC program. Borrowers can apply through one in a statewide network of participating lenders. In addition to the low rates, FirstHome participants can apply for a second loan up to 6% of the primary mortgage amount to help cover the down payment, closing costs or both.
FirstHome loans can even be used for manufactured homes, under certain conditions. To qualify, borrowers must have a decent credit score (660 on the FICO® scale). Keep in mind there are also income and purchase price limits to consider.
HomeAgain Pros – Low down payment required
– A second loan for up to 6% of the original loan value Cons – Higher interest rates and stricter income limits than the FirstHome program
– Second loan has even higher interest rates Eligibility – Credit score of at least 660
– Income and purchase price limits dependent on home location Best For – Anyone with limited income and a decent credit score who doesn’t qualify for the HomeFirst program
The HomeAgain Loan is very similar to the HomeFirst program, but it comes with slightly higher interest rates and stricter income limits. Still, the credit score requirements and down payment assistance are exactly the same.
Applicants need a FICO® score of at least 660 and may apply for a second mortgage for up to 6% of the primary mortgage amount. These funds can help cover the upfront costs of homeownership, like a down payment and closing costs. HomeAgain second mortgages have interest rates two percentage points higher than those on the primary mortgage.
UHC NoMI Loan Pros – Very low down payment required
– No mortgage insurance required
– A second loan for up to 5% of the original loan value Cons – Higher interest rates than with the FirstHome and HomeAgain programs
– Second loan has higher interest rates Eligibility – Credit score of at least 700
– Must complete a home buyer education course
– Income and purchase price limits dependent on home location Best For – Utah home buyers with a good credit score that can’t afford the upfront costs of homeownership on their own
NoMI Loans don’t carry interest rates as low as, or come with down payment assistance as high as, the FirstHome or HomeAgain mortgage programs. On the bright side, you only need a down payment of 3% with a NoMI loan. When compared to the typical 20%, this is a huge discount. Perhaps best of all, you won’t need to pay for costly private mortgage insurance (PMI).
NoMI loans also come with down payment and closing cost assistance, though this is for only up to 5% of the primary mortgage amount. TO qualify, you will need a solid FICO® score of no less than 700. NoMI borrowers also need to take between four and eight hours of home buyer education classes from Finally Home, Freddie Mac or the Department of Housing and Urban Development. Some of these classes are free and others cost around $35.
Score Pros – Don’t need a high credit score
– Low down payment required
– A second loan for up to 4% of the original loan value Cons – Higher interest rates than with the UHC NoMI program
– Second loan has even higher interest rates Eligibility – Credit score of at least 620
– Must earn less than $82,500
– Home must cost less than $294,500
– Must complete a home buyer education course Best For – Low- to moderate-income borrowers with a lower credit score that can’t afford a typical down payment
Score Loans are mortgages for mid- to low-income people that have a credit score below the 660 minimum required by other UHC mortgages. Plus, income and price limits are low, meaning it’s for less affluent first-time home buyers.
A down payment and closing cost loan is available, but only for up to 4% of the primary mortgage amount. As with NoMI loans, Score participants must complete a home buyer education course within 90 days of closing.
Grants for Veterans Pros – Up to $2,500 to help cover the costs of homeownership Cons – Not available to most people Eligibility – For members of the military or recent veterans
– Must be eligible for a VA Home Loan Certificate of Eligibility
– Available even to those that owned homes in other states Best For – Military members and recent veterans without sufficient savings
Your original mortgage can be VA, FHA, Fannie Mae or Freddie Mac. Either way, participants receive up to $2,500 after purchasing the home. Even though grants are available to people who have previously owned homes in other states, the applicant pool is very limited.
Tips to Navigate the Mortgage Market
- It’s best to figure out how much house you can afford before you start looking for your first home. That way, you will have realistic limits in mind.
- Keep in mind that buying a home means paying moving and closing costs in addition to the down payment. Along the same lines, homeownership is more than just monthly mortgage payments. Make sure you factor in homeowners insurance, property taxes, and maintenance costs.
- Buying your first home in Utah will undoubtedly impact your budget. A professional can show you how to maintain balance across your entire financial life. Get matched with three potential advisors with the SmartAsset financial advisor matching tool.
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