If you’re planning a move to New York, you know it’s very expensive there, especially when it comes to housing. Housing costs in the Big Apple are 270 percent above the national average. Furthermore, it can be challenging for first-time homebuyers to come up with the significant down payments that are often required.
Fortunately, the federal and state governments offer multiple loan and grant programs to help residents buy, upgrade, or build homes. Although many of these programs are available to all homebuyers, they can particularly benefit individuals and families buying their first home or who haven’t purchased a home in some time.
This post describes the major homebuyer assistance programs that may be useful to first-time homebuyers in NYC. If you’re a new resident of New York and are looking to buy a home, this information may help.
Federal Programs
Federal agencies run several programs for homebuyers with lower credit scores or who have difficulty making a down payment.
Federal Housing Administration (FHA) Loans
The FHA helps borrowers with lower credit scores secure home loans by guaranteeing their mortgages. Homebuyers can choose from approved participating lenders. Homebuyers must make a down payment of 3.5 percent to 10 percent of the purchase price, depending on credit score. The down payment can be gifted from another person. FHA loans also require an upfront fee and annual mortgage insurance premiums. Interest rates are competitive with the market, especially for those with credit scores of 580 or higher. The FHA is part of the U.S. Department of Housing and Urban Development (HUD), and more information about FHA loans is on the HUD website (https://www.hud.gov/).
Freddie Mac and Fannie Mae Mortgages
Low-income homebuyers can get a Freddie Mac Home Possible mortgage with a 3 percent down payment. These are available to buyers with a credit score of at least 660. Mortgage insurance is required until the buyer has paid off 20 percent of the loan amount. The down payment can come from the borrower’s savings, co-borrowers, secondary loans, and sweat equity. Freddie Mac mortgages have set income limits that vary by area, and are limited in the types of properties that can be purchased. More information is available on the Freddie Mac website (https://sf.freddiemac.com/working-with-us/origination-underwriting/mortgage-products/home-possible).
Fannie Mae’s HomeReady program is similar. It requires a 620 or higher credit score and a 3 percent down payment. It also has income limits that depend on the area. Fannie Mae doesn’t charge a mortgage insurance fee, unlike the FHA program. Visit the Fannie Mae website for more details (https://singlefamily.fanniemae.com/originating-underwriting/mortgage-products/homeready-mortgage).
VA Loans
The VA loan program may interest you if you’re a U.S. military member or veteran. VA loans are issued by traditional mortgage lenders and backed by the U.S. Department of Veterans Affairs. These come with low interest rates and options to buy with zero down payment and no private mortgage insurance. Additionally, VA loans set limits on closing costs and have less stringent income and credit score requirements. But there is a VA funding fee that depends on the individual’s military service and whether they have had a VA loan previously.
Good Neighbor Next Door Program
Another loan program intended for specific groups is HUD’s Good Neighbor Next Door program. This program is for teachers and emergency first responders and is intended to encourage them to buy homes in certain areas where HUD promotes community revitalization. It doesn’t offer mortgages but provides 50 percent discount off the list price of a home. There is a competitive application process, and borrowers must live in the home for at least three years. More information is on the HUD website (https://www.hud.gov/program_offices/housing/sfh/reo/goodn/gnndabot).
Native American Direct Loan Program
If you’re a Native American who served honorably in the U.S. military, the Native American Direct Loan (NADL) program may be for you. Under this program, the VA issues loans directly to eligible Native American veterans and their spouses. Purchases are limited to specific areas such as Federal Trust lands. No down payment is needed, and there is a fixed interest rate. Closing costs are lower than conventional mortgages. Learn more on the VA website (https://www.va.gov/housing-assistance/home-loans/loan-types/native-american-direct-loan/).
New York State Programs
State of New York Mortgage Agency (SONYMA) Programs
The SONYMA runs several programs for first-time homebuyers. The agency works with lenders around New York to provide mortgages to lower-income New York residents. Most loans have 30-year terms with fixed interest rates, and down payments can be as low as 3 percent. There are also Down Payment Assistance Loans. The loans can be applied to single-family homes, co-ops, and condos. Buyers must meet specific qualifications, including at least two years of employment, three lines of credit, a 50 percent or lower debt-to-income ratio, and income and home value requirements.
The SONYMA offers multiple loan programs for lower-income buyers, new graduates, military veterans, and purchasers of Energy Star labeled homes. You can find out more about these on the SONYMA’s website (https://hcr.ny.gov/sonyma).
Buying a home in NYC can be expensive. But there are federal and state resources that can help. If you’re a new homebuyer in New York, these resources may help you get into your first home.
We hope you found this post, Best First Time Home Buyer Programs & Grants in NYC helpful. Be sure to check out our post, First-Time Homebuyer’s Guide 2023 for more great information.
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