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Financial Assistance Programs to Help First-Time Home Buyers in the D.C. Area

Posted by Hunter McFadden on Oct 4, 2017 7:47:51 AM

Investing one’s savings and taking on the long-term financial obligation of a home is daunting. But the payoff is extremely lucrative. Homeowners are 38 times wealthier than renters, states a CNBC report. 49% of millennials say that buying a home will most likely be their next step, says a survey by Fannie Mae. But the same survey states that 57% of young renters cited financial reasons for not buying a home. Poor credit, high down payment costs, a low monthly income, and too much existing debt were cited as the main obstacles.

Fortunately, there are many grants and programs offering financial relief to first-time home buyers: loans with no down payment; insured loans for poor credit scorers; and mortgages at low interest rates. For those of you who have been postponing home buying due to lack of financial options, here’s a compilation of grants and programs in the D.C. area that can help you realize your homeownership dream:

Financial Assistance Programs to Help First-Time Home Buyers in the D.C. Area

1. Federal Housing Administration (FHA) Loan

The FHA is a United States government agency that insures home loans by banks and other private lenders. FHA loans typically come with competitive interest rates, smaller down payments, and lower closing costs than conventional loans. Applicants with a credit score of 580 or higher are eligible for this loan and have to pay only 3.5% of the purchase price as down payment. These loans require a private mortgage insurance that is tax-deductible and provides protection to the lender in case of defaults on payment. The loan limit varies with housing type and region.

If you plan to purchase a fixer-upper (a property that will require repair, reconstruction, or redesign to become habitable), a FHA-backed 203(k) Rehabilitation mortgage lets you borrow the repair cost with the primary mortgage, at no extra down payment. With a down payment as little as 3%, these loans are beneficial for low- and moderate-income individuals or families. There are eligibility conditions to be fulfilled by homes to fall in this category.

2. U.S. Department of Agriculture (USDA) Loan

This program guarantees a loan for residences in USDA-specified rural areas. These loans require no down payment, but applicants’ credit scores should be 620 or higher. The loan payments are fixed and there are income and region eligibility conditions.

3. VA Loan

The U.S. Department of Veteran Affairs (VA) helps active service members, veterans and surviving spouses purchase homes with loans that have no minimum credit score requirement, no qualifying income bracket, and no private mortgage insurance. But applicants are expected to have a stable income and a residual income after meeting their basic requirements. VA loans have low interest rates and no down payment. Applicants must obtain a certificate of eligibility for this loan.

4. Good Neighbor Next Door Program (GNND)

This HUD-sponsored program offers assistance to law enforcement officers, firefighters, emergency medical technicians and teachers. Homes are available at a 50% discount on listed price in revitalization areas (specific areas that are determined based on average household income, homeownership rates and FHA-backed mortgage foreclosure activity). At application time, respondents have to commit to stay in the residence for at least three years and should not have owned any other residential property one year prior.

5. Fannie Mae and Freddie Mac Program

Fannie Mae and Freddie Mac are government-sponsored agencies that help low-, moderate- and middle-income Americans take advantage of loans with a 5% down payment and competitive interest rates. Lenders that meet the eligibility and underwriting criteria are qualified to offer Fannie Mae-backed loans. For purchasing a single-family home, a FICO score of at least 620 for fixed-rate loans and 640 for adjustable-rate mortgages (ARMs) is required.

6. Home Purchase Assistance Program (HPAP)  for D.C. Residents

The program provides interest-free loans and closing cost assistance to qualified applicants. They can receive interest-free loans (up to $40,000) and help with closing costs (up to $4,000). Under this program, moderate-income families (earning between 80% and 110% of the area median income) can defer loan repayment by 5 years, and very low-income buyers (who earn below 80% of the area median income) can defer repayment till the property is sold, refinanced, or ceases to be the primary residence. The eligibility conditions are many: the applicant must be a first-time homebuyer and the head of the household; cannot have owned a home three years prior to application; and must be a low-or moderate-income individual or family. first

7. D.C. Open Doors

This program provides down payment assistance to homeowners who may exceed the income levels of other assistance programs. Individuals earning up to $123,395 a year are eligible. Applicants need to have a credit score of 640 or higher and a debt-to-income ratio not more than 45%. The program offers loans of up to 3.5% of the home price to be used as a down payment. 20% of the loan is forgiven for each year the homeowner stays in the home.

8. Employer-Assisted Housing Program(EAHP) for D.C. Residents

The program provides assistance to employees of the District of Columbia Government who are purchasing a home here for the first time. The EAHP- funded property must be the employee’s primary residence. Qualifying applicants are eligible for matching down payment funds up to $1,500 and a deferred loan of up to $10,000 to be used towards the home purchase. The maximum allowable purchase price is $625,500.

9. Maryland Mortgage Program(MMP)

The Maryland Department of Housing and Community Development provides first-time buyers with a 30-year, fixed-rate loan, as well as down payment assistance. Buyers can work with any approved MMP lender to apply for these funds. The household income of applicants should range from $88,400 for a 1-2 person household to $128,760 for larger households.  All applicants must complete a HUD-approved home buying course to qualify for this first-time homebuyer’s program.

10. You’ve Earned It Initiative for Maryland Residents

The You’ve Earned It Initiative helps first-time buyers who live in certain sustainable communities and have at least $25,000 in student debt. Qualifying applicants get a 0.25% discount on the standard MMP mortgage rate. Sustainable communities are regions across the state where governments, business and communities coordinate investments to achieve sustainable growth, good jobs and thriving neighborhoods. Use the online Mapping Tool to identify if a property falls in this bracket.

11. The Down Payment Assistance Program (DPA) for Virginia Residents

The DPA program provides flexible financing for first-time homebuyers to low- and moderate-income Virginians (with income level at or below 80% of the Area Median Income) to purchase homes that are safe, decent and accessible. Homebuyers access funds through local DPA provider agencies selected by the state through a competitive application process. The buyer must agree to complete a homebuyer education counseling course.

12. Virginia’s First-time Home Saving Plan (FHSP)

This plan allows anybody (yourself, parents or grandparents) to set aside up to $150,000 toward the costs of closing on a new home. The earnings on those funds — interest and capital gains — are free from Virginia state taxes forever. There is no income eligibility for this plan.

Your financial woes should not hold you back from buying your first home. Hopefully this article opens avenues that you may not have considered before and encourages you to become a property owner.

Choose the Right Realtor: First Time Homebuyers Edition

For the guidance, expertise and resources of a first-time-buyer specialist realtor, contact Hunter McFadden.

Topics: Millennials, D.C. Metro Area, First time home buyers, Mortgage payments, Financial Assistance


Hunter McFadden is a third-generation realtor in the Washington, DC area, offering extensive knowledge of the market and trusted personal service to homebuyers and sellers. or 703-862-6840. 

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