First-time homebuyer programs (FTHP’s), when available, can make purchasing a home more affordable for low-to-moderate income individuals and families – but there is generally always a catch. For example, the Florida Housing Finance Corporation advertises that they offer fixed, low-interest rate FTHP loans. This is true, however the rate is actually higher than what is offered by the most active mortgage lenders in the industry.
Before you get excited about being approved under a government-sponsored first-time homebuyer program, you should know:
- Some grants can only be used towards your down payment, not closing costs – and in most cases are required to be repaid (getting a gift from a relative may be better)
- A home inspection report (not required under a conventional loan) may crater the deal because all costly repairs will likely need to be completed prior to closing
- Some programs have long waiting lists, so be prepared that it may take well over a year before you find out if you qualify
- Including all other income sources with your application (such as alimony and child support) will often disqualify the applicant because the maximum income threshold may be exceeded
First-time homebuyer programs generally always require another separate government approval stamp. It is therefore not uncommon for loans to be declined at the last minute when it would appear the borrower could qualify for a regular conventional loan.
Sometimes all it takes is a little more preparation and guidance – and a first-time homebuyer can comfortably qualify for more cost-effective conventional financing.
Here’s the Point:
First-time homebuyer programs, if available, are not always the best or most cost-effective solution.