Home buyer Grants

Get the Funding You Need as a First Time Home-Buyer

A: Understanding Grants, Loans and other Funding Alternatives for First Time Homebuyers

It is fundamentally important to understand the differences between grants, loans and other sources of financing to buy your first home.

We have all read the marketing hype in our e-mail, television or classified ads, and the internet, about "free" and "easy" grant money from the government that is just "waiting" for us to wave our magic wand (after we've paid the marketer for their e-book, CD or products ). This course isnotmarketing hype. It is just the facts a reality check to provide you with practical and useful information about what, where, when and who can apply for grants (and who cannot), and how you can use effective research, writing and follow-up to increase your chances of getting a grant to buy your first home. It includes success stories, resources, glossary and a current directory of grants, loans and other funding that is available today.

Who is a "First Time Homebuyer" You may be eligible and not know it

Before we begin, it is important to know that the term "first time homebuyer" is not necessary limited to people seeking to purchase and own their first home. Many "first time homebuyer" funding programs include homebuyers who have not owned a home for three or more years. In other words, past home-ownership (at least three years ago) does not necessarily exclude you from participating in a "first-time homebuyer" funding program.

That said, here is a summary of various alternative funding programs for "first-time homebuyers". Remember, each program may have its own eligibility criteria.

Grants

Grants are free financial assistance provided by various funding sources (grantors) to enable you to perform a particular service or act as described in the grantor's request for proposal (RFP) and your grant funding proposal.. You do not pay any fees and they are not taxable income. What's the catch? There is none. The grantor pays grant recipients (grantees) to provide or perform services or products (such as financial support for housing) in exchange for its grant money.  They are awarded for projects that benefit a particular community or public service, such as housing, and other causes favored by the particular grantor. There are grants available for first-time homebuyers. You just have to know where to look and how to find them. As we will see in Section 2 (Research), federal agencies such as HUD do not offer grants to individuals.

This is HUD's policy, despite statements by many so-called "grant gurus" on their web sites, e-books and elsewhere describing free and easy grants and other funding available for almost anything you want. These are intended for the marketer's benefit (selling books, CDs or other services), not yours. Much of this is overdone marketing hype. Unfortunately a lot of it is not true. (See Section 5, "Avoiding Funding Scams".)

When it comes to buying a first home, you will likely receive funds from state or local agencies or non-profit organizations that received the grant funds (a/k/a grant recipient/grantee) and other funding from Federal and/or state agencies. These various funding programs and alternatives are discussed in detail later in this Section (and in Section 2, Research).

Two advantages of grants compared to loans as your funding source are: 1) grants do not have to be repaid, and 2) grants are not debts and do not appear on your credit history.

Federal Grants

The U.S. Department of Housing and Urban Development (HUD) is the primary source of federal housing grants. HUD offers many different programs, depending upon your income level and other factors.

In 2006, HUD's SuperNOFA program will make $2.2 billion in grants available through 39 different programs. HUD recently changed its grant submission process and now requires grant applications be submitted electronically (see details in Section 3, Writing).

The American Dream Down Payment Act of 2003 is intended to help 40,000 families a year to pay their down payment and closing costs for their first home. It is the government's response to the biggest challenge to homeownership -- accumulating enough funds for a down payment. The American Dream Down Payment Fund helps low-income families take steps to own a home with down payment assistance; and by increasing support for self-help homeownership programs like Habitat for Humanity. It also increases home-buying education programs sponsored by another federal agency, the Federal Deposit Insurance Corporation (FDIC).

Minority First-Time Homebuyers

The FHA (Federal Housing Administration) is HUD agency that offers grants and other funding for first-time homebuyers. HUD plans to create 5.5 million new minority homeowners by 2010. Since 2002, 2.6 million minority families have become homeowners through this program. Through FHA, HUD recently launched this new national campaign to educate and inform first-time minority (African American and Hispanic) homebuyers about grant funding programs, available in 16 communities nationwide:

Atlanta, GA; Chicago, IL; Columbus, OH; Dallas/Ft. Worth, TX; Denver, CO; Detroit, MI; Houston, TX; Las Vegas, NV; Los Angeles/Long Beach, CA; Miami, FL; Philadelphia, PA; Phoenix/Mesa, AZ; San Bernardino/Riverside, CA; St. Louis, MO; Tampa, FL and Washington, DC/Baltimore, MD.

      The agency's latest initiative is to public educate about how FHA loans promote first-time home ownership. (The campaign also focuses on the dangers of predatory lending (see Avoiding Scams Section 5).

Minority Home Ownership Public-private partnerships

   The Government has issued America's Homeownership Challenge to real estate and mortgage finance industries to encourage them to join the effort to close the gap between the homeownership rates of minorities and non-minorities. It promotes partnerships in the private sector to increase minority homeownership, which have resulted in.

• More than 1 million new minority homeowners since the program began

• Nearly 1,500 low-income families are using housing vouchers to pay their monthly mortgage or other costs of owning a home,

• HUD works with state and local Public Housing Authorities to allow the sale ofsome units to tenants.

"HUD Homes"

"HUD Homes" are HUD-insured homes which have been foreclosed by the lender because the owner can't meet the payments. HUD pays the lender what is owed and takes ownership of the home, then sells it at market value - the price is based on the price of similar homes sold in the area.

Almost anyone can buy a HUD home, for cash or if they qualify for a mortgage. HUD homes range in price, but most are affordable for low- and moderate-income Americans. Contrary to popular myth, you cannot get a HUD Home for $1 dollar.

HUD Homes are sold "as-is," without warranty. If the HUD Home needs repairs, HUD will not make them. However, it can still be a bargain, as HUD's asking price on the home includes the fact that the buyer will have to invest money to make improvements. HUD may also offer special incentives such as an allowance to upgrade the property, moving expense allowance, or a bonus for closing the sale early. On most sales, the buyer can request HUD to pay all or a portion of the financing and closing costs. Your real estate agent will have details. Get the home professionally inspected before you make an offer so you will know what repairs you may have to makeBEFORE you submit your bid.

You buy a HUD home by finding a participating real estate agent, who must submit your bid for you. Normally, HUD Homes are sold in an "Offer Period." At the end of this "Offer Period," all offers are opened and the highest reasonable bid is accepted. If the home isn't sold in the initial Offer Period, you can submit a bid until the home is sold. If your bid is accepted ny HUD, you or your real estate agent is notified. You are then given a settlement date, normally within 30-60 days, to arrange financing and close the sale, or forfeit your earnest money deposit, or pay for an extension of your sales contract.

You can find what HUD Homes are for sale at the HUD web site. If you see one that interests you, contact one of the real estate agents in your area who shows HUD homes.

To get a loan to buy a HUD Home (HUD doesn't make loans directly) you need to find a mortgage insurance program to help you buy a home. Contact a HUD approved lender who will take you through the steps and make the loan.

Most HUD Homes are initially offered on a priority basis to owner occupant purchasers (people who are buying the home as their primary residence). Following the priority period, unsold properties are then available to all buyers, including investors.

Teachers, police and fire-fighters qualify for 50% discounts in certain situations (see Police, Fire and Teacher Homes Programs later).