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Home Buying Programs In your State

Several years ago, in order to encourage and help first time home buyers with the purchase of a home, several assistance programs were developed. New borrowers were educated and given tools to help them understand how to budget and make timely payments, so that they would not end up with financial difficulties that would lead to foreclosure, and give them a bad credit rating. The idea was to better educate and help the consumers, which in turn would also benefit the lenders when they made their payments on time. The program included assistance with their down payment in exchange for a required class or reading assignments in order to receive the incentive.

These assisted types of loans for first time home buyers allowed the borrower to get a loan for nearly 100% of the value of the home they were purchasing. For this reason, many borrowers really loved these programs. Many people who were applying for the FHA-insured types of mortgages were offered the original first time homebuyer assistance programs. After a while, lenders and mortgage insurance companies realized that these programs were too risky and expensive, because when the housing market struggled and home values dropped, the homeowner could likely be upside down in the mortgage because he started out with no equity. This put many consumers in a position where they needed to do a mortgage refinance at a better rate, for a lower payment. Without equity in their home, they usually couldn’t qualify for the mortgage refinancing. Many borrowers simply walked away and left the banks or mortgage companies with the homes. They figured this was easier and better for them than trying to make payments they couldn’t afford on a home that wasn’t even worth what they owed on it.

Most of the first time home buyer assistance programs that help the borrower make their down payment are not offered anymore. However, there are programs that offer certain incentives to borrowers who wish to purchase a home. These are somewhat restrictive and only certain individuals that meet specific criteria of different sorts may qualify. One such program is the "Good Neighbor Loan" that can be obtained by teachers and certain other civil servants. This loan requires a second lien to be put on the home and there is an occupancy requirement. After a certain amount of time if all other terms are met as required, the second lien is forgiven.

FHA loans that only require a 3.5% down payment are another type of assistance program since the down payment requirements are so low. Other first time homebuyer assistance programs that are available apply only to HUD-owned properties and are designed to revitalize specific areas. Time will tell if the assistance programs available today will prove successful or be like the assistance programs of old that actually caused more foreclosures. By consulting with a loan officer who knows all of the available options, you can determine the best type of loan for your circumstances.