Thanks to beautiful scenery, relatively affordable mortgage rates and robust economy, Idaho is an great destination for new homeowners. If you’re thinking about settling in the Gem State, check out first-time home buyer programs from the the federal and Idaho state governments. There are down payment assistance and tax credit programs in addition to home buyer education and discounted mortgages. Best of all, nearly every would-be borrower will qualify for something. If all the options are overwhelming, consider working with a financial advisor to nail things down. The SmartAsset financial advisor matching tool can help you find an advisor in your area to pick which program is right for you.
Federal First-Time Home Buyer ProgramsFHA Loans Pros – Flexible credit approval
– Low down payment needed Cons – Higher down payments for lower credit scores Eligibility – Credit score of at least 500
– Down payment of at least 3.5% Best For – Anyone lacking adequate savings for a standard down payment
The Federal Housing Administration (FHA) program is a very popular first-time home buyer program in Idaho. Though backed by the FHA, you will apply for a FHA loan through a third-party lender. Reduced interest rates are great, but the biggest benefit of FHA loans is the minimum down payment requirement.
Rather than the typical 20%, buyers only need to provide 3.5% of the home’s value at closing. Plus, almost anyone can qualify for an FHA loan. You need a FICO® credit score of 580 to receive the down payment perk in its full glory, but if your score falls between 500-580, you can get a FHA loan by making a down payment closer to 10%.
USDA Loans Pros – Flexible credit approval
– No down payment Cons – Only available in select areas
– Only available to those that can’t get a conventional mortgage Eligibility – Home in an eligible area
– Income within 115% of the local median Best For – Low- and mid-income buyers willing to live in the country
The “Section 502 Single Family Housing Guaranteed Loan Program,” better known as USDA mortgages, was created to attract new home buyers to rural and semi-rural communities throughout the country. If you’re looking to buy a home in the country, it’s worth looking into a USDA loan.
A 3.5% down payment is nice, but with USDA loans, most applicants won’t pay any down payment at all. You just have to prove that you are a credible borrowers and haven’t been able to secure a conventional mortgage. If your score falls a bit lower on the spectrum (500-580), you could still qualify. You will just have to pay a down payment closer to 10%.
VA Loans Pros – No down payment
– No private mortgage insurance requirement
– Usually comes with reduced closing costs Cons – Must pay VA funding fee Eligibility – Credit score of at least 620
– Military members and veterans, their spouses, or other beneficiaries Best For – Idaho veterans that can’t afford a down payment
The Department of Veterans Affairs (VA) insures VA loans, which helped active and retired military servicemen and women achieve the American Dream they fought to preserve. Most buyers will be eligible for a loan worth 100% of their home’s value. In other words, no down payment.
Plus, since the VA backs part of your risk, you will not have to get private mortgage insurance (PMI), which is usually required for down payments lower than 20%. VA loans also tend to come with low closing costs, meaning even more savings.
Buyers need a credit score of 620 or higher to qualify. You will also need to contribute 1.25-2.4% of your home’s value into the VA fund, depending on the size of your down payment – should you choose to make one at all.
NADL Pros – No down payment
– No private mortgage insurance requirement
– Usually comes with reduced closing costs
– Reduced, fixed rate
– Flexible credit approval Cons – Only available in select areas Eligibility – Home in an eligible territory
– Military members and veterans of Native American descent, their spouses, or other beneficiaries Best For – Native American veterans without a clean credit history
The Department of Veterans Affairs also sponsors Native American Direct Loans (NADL), which are specifically designed for Native American service men and women and veterans. Just like with VA loans, NADL loans don’t require any sort of down payment in most cases. They also don’t necessitate any private mortgage insurance and generally come with reduced closing costs.
NADLs are especially beneficial because of their reduced, set interest rate (which is currently 4.5%). Don’t worry if your credit score is on the weak side. NADL participants do not need a strong credit history to qualify. Just keep in mind that NADL-supported homes must be located on allotted lands, Alaska Native corporations, Pacific Island territories or federally-recognized trusts.
Good Neighbor Next Door Program Pros – 50% discount on home price Cons – Only available in select areas Eligibility – Must live in home at least three years
– Police officers, firefighters, emergency medical technicians or pre-K through grade 12 teachers Best For – Public servants without enough savings to afford a home
The Good Neighbor Next Door Program from the Housing and Urban Development (HUD) is like a thank you to police officers, firefighters, emergency medical technicians, and teachers. For all they do for the community, HUD awards eligible home buyers with a 50% reduction on the price of their home. Participants are encouraged to use a FHA, VA, or conventional loan to cover the rest of the cost.
To qualify, homes must be located in HUD-designated “revitalization” areas and buyers must agree to live in the home for at least three years. Once the three years are up, you can sell the home and retain any equity and profit.
The Good Neighbor discount is unsurprisingly competitive. After getting past the pre-approval stage, you will enter a lottery with other eligible home buyers eager to score the same listing.
Fannie Mae and Freddie Mac Pros – Several loan types available
– Don’t need any credit history to qualify
– Low down payment
– Cancellable private mortgage insurance Cons – Higher rates than other federal programs Eligibility – Income within local median Best For – Any buers that don’t qualify for other federal programs.
Other federal home buyer programs are the result of partnerships between an organization and a third-party lender. Fannie Mae and Freddie Mac, on the other hand, are government-sponsored mortgage providers. Technically two different entities, they offer very similar benefits that anyone buying a first home can benefit from.
Freddie Mac’s Home Possible: 95% LTV and Home Possible Advantage: 97% LTV programs require 5% and 3% down payment, respectively.Though you will need to get private mortgage insurance, you can cancel it once you’ve accrued 20% equity in your new home.
With a Home Possible loan, you can choose both the length (15 or 30 years) and terms (5/5, 5/1, 7/1 or 10/1 adjustable-rate) of the loan. You do not even need any credit to qualify. A Home Possible Advantage mortgage is basically the same thing, but it always comes with fixed rates and has minimum credit requirements.
The HomeReady® loan from Fannie Mae also helps low- and moderate-income buyers secure a mortgage without paying a high down payment. To qualify, you must have a minimum credit score of 620 and provide just 3% of the home’s value at closing. It comes with the same cancellable mortgage benefit as the Home Possible loan.
Idaho First-Time Home Buyer Programs Idaho Housing Home Loan
Pros – Lowest interest rates in Idaho
– Several loan types available
– No down payment or private mortgage insurance needed in some circumstances
– Potential to combine with down payment assistance grants and tax credit to save even more Cons – Must meet lender and FHA, VA, USDA, or conventional loan requirements Eligibility – Credit score of 620 or above
– Income and purchase price limits dependent on household size and home location Best For – Low- and mid-income buyers that need a break on interest rates
Idaho Housing and Finance Association (IHFA) offers first-time home buyer programs with discounted rates (as low as 4.32%) on 30-year fixed-rate FHA, VA, USDA, and conventional loans. In some cases, IHFA can also lower or eliminate homeowners insurance costs.
Most Idaho Housing loans can be combined with down payment and closing cost assistance so you won’t have to deplete your savings to achieve the American Dream. Some require that you complete Finally Home!® home buyer education and pre-purchase counseling, but there are free classes.
Good Credit Rewards Pros – Receive up to 2.5% of your loan up to $8,000
– Potential to combine with tax credit to save even more Cons – Cannot be combined with a gift
– Interest rate 2% higher than Idaho Housing’s standard interest rates Eligibility – Credit score of 640 or above
– Must contribute .5% of the purchase price
– Income and purchase price limits dependent on household size and home location
– Liquid asset limits dependent on age and income
– Must complete home buyer education Best For – Home buyers taking advantage of Idaho Housing programs who need more help to cover their down payment or closing costs
Home buyers participating in Idaho Housing loans may be eligible for a second, 10-year fixed-rate loan to help cover down payment and closing costs. Second loans are worth 2.5% of the home’s value, or $8,000 – whichever is lower. It cannot be higher than your down payment amount.
There are a few restrictions with the Good Credit Rewards Program. The minimum credit score is 640, but several loans require a score above 680. Borrowers also must have liquid assets lower than three months’ income, or $5,000 – whichever is greater. This requirement loosens up a bit for borrowers over age 62. In that case, liquid assets can be $10,000.
No matter what, a borrower must contribute at least .5% to the original mortgage from their own funds. Unfortunately, the second loan comes with an interest rate two percentage points above Idaho Housing’s standard interest rates. Also, if all borrowers are first-time homeowners, you will have to complete a Finally Home!® home buyer courses.
Idaho Housing Home Buyer Tax Credit Pros – Reduced federal tax bill
– Lasts the entire lifetime of the loan until repayment, refinancing, or sale Cons – Must pay $300 fee to lender Eligibility – Idaho Housing, FHA, VA, USDA, or conventional mortgage participant
– Income and purchase price limits dependent on household size and home location Best For – Low- and moderate-income first-time home buyers in Idaho that want to save on their annual tax bill
In addition to loan and down payment assistance programs, the Idaho Housing and Finance Association provides eligible home buyers with a Mortgage Credit Certificate (MCC). Through this program, buyers receive an annual federal tax reduction of up to 35% of the interest paid on their mortgage with a maximum of $2,000 a year.
Borrowers can claim the credit every year for the life of the loan so long as the home remains their primary residence. That usually means about $2,000 a year and tens of thousands of dollars saved over time.
Unused tax credits can be carried forward for up to three years and the MCC can be combined with other Idaho Housing loan products. You will have to pay a $300 fee to your borrower, but that’s a small price to pay compared to the long-term savings.
Tips for Selecting the Right First-Time Home Buyer Program
- Check whether your local government sponsors first-time home buyer programs. We’ve listed federal and Idaho state programs, but you might have more options.
- A home is likely the largest purchase you’ll make in your life. If you’d like some professional guidance, the SmartAsset financial advisor matching tool can help. It will pair you with three potential advisors in your area that know all about balancing financial obligations as a homeowner.
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