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First-Time Home Buyer Programs in Louisiana for 2018

Liz Smith
Louisiana first-time home buyer programs

No matter where you hope to live in Louisiana, you’ll never be far from great music, delicious food and exciting activities. Unfortunately, picking a mortgage is much harder than picking a neighborhood, but first-time home buyer program could help. Both the federal and Louisiana state governments sponsor several first-time home buyer programs that make home ownership easier and more affordable for all kinds of would-be borrowers. If you need help deciding, use the SmartAsset financial advisor matching tool to access local financial experts.

Federal First-Time Home Buyer ProgramsFHA Loans Pros – Low down payment requirement
– Flexible credit approval Cons – Applicants with low credit scores may need to make higher down payments Eligibility – Credit score of at least 500
– Down payment of at least 3.5% Best For – Buyers without a clean credit history or sufficient savings for a down payment

The FHA loan program is one of the most popular first-time home buyer programs in Louisiana. So, what is an FHA loan? Backed by the Federal Housing Administration (FHA), these loans are distributed by local, third-party lenders in the state. They come with lower interest rates but the biggest benefit is a low down payment requirement.

Rather than the usual 20%, borrowers only need to cough up 3.5% of the home’s value at the time of purchase. Better yet, FHA loans are available to almost all potential borrowers. You need a FICO® credit score of 580 to receive the down payment perk in its full glory, but you can still qualify if your score falls below that benchmark. You’ll need to make a down payment closer to 10%, but that’s still half the usual amount!

VA Loans Pros – No down payment requirement
– No private mortgage insurance requirement
– Usually comes with reduced closing costs Cons – VA funding fee
– Long application process Eligibility – Credit score of at least 620
– Current and former military members and their spouses or other beneficiaries Best For – Veterans without enough income or savings to afford a down payment

Arguably, veterans and active members of the military are more worthy of the American Dream than anyone else. The Department of Veterans Affairs developed VA loans to help. The department backs these loans, but several mortgage lenders throughout Louisiana actually issue them.

Since many veterans don’t earn enough monthly income or have sufficient savings to afford a down payment, VA loans do not make you pay one. Plus, since the government will back part of your risk, you also won’t have to get private mortgage insurance (PMI).

To qualify for these impressive perks, veterans need a credit score of at least 620. You 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). VA loans usually come with low closing costs too, leaving even more money in your wallet.

USDA Loans Pros – No down payment requirement
– Flexible credit approval Cons – Applicants that can qualify for a conventional mortgage won’t be accepted
– Only available in select areas Eligibility – Earn within 115% of the adjusted U.S. median income
– Home in an eligible area Best For – Low- and mid-income buyers willing to live in a rural or semi-rural area

The United States Department of Agriculture (USDA) sponsors “Section 502 Single Family Housing Guaranteed Loan Program.” Also known as USDA mortgages, these loans attract new home buyers to rural and semi-rural communities throughout the state. So long as you have a decent credit history, they completely eliminate the need for a down payment.

To qualify, you must earn less than 115% of the U.S. median income. You also have to prove that you are unable to secure a conventional mortgage. Don’t worry if your score falls a bit lower on the FICO® scale. You’ll just have to pay a down payment around 10% of your home’s value. At half the standard down payment size, it’s still a big improvement from most home buyer’s experience.

Good Neighbor Next Door Program Pros – 50% flat discount on home price Cons – Only available in select areas or for certain professionals Eligibility – Remain in home at least three years
– Police officer, firefighter, emergency medical technician or pre-K through 12th grade teacher Best For – Public servants without enough income or savings to afford a home

The U.S. Department of Housing and Urban Development‘s (HUD) Good Neighbor Next Door Program is not a loan. It rewards police officers, firefighters, emergency medical technicians, and teachers with a 50% discount off the listing price of a home in a HUD-designated “revitalization” area. Borrowers may still need a conventional, VA, or FHA mortgage to finance the rest of the home. You could also pay cash.

In addition to having a certain job and buying a home in a certain area, you must also agree to live in the home for at least three years after the purchase. On the bright side, you can sell the home and retain any equity and profit once the three years are up.

Fannie Mae/Freddie Mac Pros – Low down payment requirement
– Flexible credit approval
– Cancellable private mortgage insurance
– Multiple loan types available Cons – Higher rates than other federal programs Eligibility – Earn within location-specific income requirements Best For – Buyers that need a low down payment option but don’t qualify for other federal programs.

Most federal first-time home buyer programs are a partnership between a federal organization and an external lender. Freddie Mac and Fannie Mae, on the other hand, are government-sponsored mortgage providers. They are similar entities, but offer different programs with different benefits.

You’ll only need a 3% down payment and 620 credit score to secure a Fannie Mae’s HomeReady® loan. To qualify, you must also earn an income at or near the U.S. median. Though you need private mortgage insurance at the time of purchase, you can cancel it once you’ve accrued 20% equity in your new home.

Freddie Mac’s Home Possible: 95% LTV and Home Possible Advantage: 97% LTV, meanwhile, require minimum down payments of 5% and 3%, respectively. 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. It also has the cancelable private mortgage insurance that comes with a Fannie Mae HomeReady loan. Perhaps best of all, you won’t need a strong (or any) credit history to qualify. A Home Possible Advantage mortgage is essentially the same thing, but it always comes with fixed rates and has credit requirements.

NADL Pros – No down payment requirement
– No private mortgage insurance requirement
– Flexible credit approval
– Usually comes with reduced closing costs Cons – Only available in select areas Eligibility – Home in an eligible territory
– Current or former military member of Native American descent and their spouses or other beneficiaries Best For – Native American veterans that don’t have the necessary income or savings to afford a down payment

Native American Direct Loans (NADL) from the Department of Veteran Affairs are designed specifically for Native American veterans and their families. Some NADL benefits, like reduced closing costs and withdrawal of the private mortgage insurance requirement, are extended from regular VA loans. Along the same lines, an NADL can also cover up to 100% of your home’s value.

What sets NADLs apart is the set interest rate, which is currently 4.5% . To make things even better, you do not need a strong credit history to qualify. Just remember that the home must be located on allotted lands, Alaska Native corporations, Pacific Island territories or federally-recognized trusts.

Louisiana First-Time Home Buyer Programs

Louisiana first-time home buyer programs

Single Family Homeownership Programs from the Louisiana Housing Corporation (LHC) help low- and mid-income Pelican Staters purchase their first home. All LHC mortgages are 30-year, fixed-rate loans with below-market interest rates. They’re administered through approved third-party lenders. The organization also provides down payment assistance grants and mortgage tax credits to make homeownership even more affordable. Any buyers that haven’t owned their primary residence in the last three years, have a credit score of at least 640, and complete a home buyer education course are eligible to participate. In some cases, income and purchase price limits also apply. Learn more below.

LHC MRB Assisted Program Pros – Reduced interest rates
– Up to 4% down payment assistance
– Second loan forgiven after three years Cons – Code compliance fee Eligibility – Credit score of at least 640
– Home cost lower than $271,164
– Income limits dependent on household size and home location
– Home buyer education course Best For – Low- and mid-income buyers without adequate savings for a down payment

LHC’s Mortgage Revenue Bond sponsors two different programs. The first, MRB Assisted, offers a 30-year, fixed rate mortgage at below-market interest rates (currently 4.875%) as well as a forgivable second loan to help with down payment and closing costs. With an Assisted loan, this second loan is worth up to 4% of the original loan amount.

The loan is subordinate to the original mortgage lien. It is also forgiven at a rate of 1/36 per month so long as you remain in the home and do not refinance or pay off your mortgage within 36 months. In other words, you won’t have to pay the second loan back as long as the home is still your primary residence and you’ve made mortgage payments on the original loan for three years. You will have to pay a $75 code compliance fee, but that’s a small dent in the lifetime savings of the program.

LHC HOME/MRB Program Pros – Reduced interest rates
– Up to 9% down payment assistance
– Second loan forgiven over time Cons – Code compliance and inspection fees Eligibility – Credit score of at least 640
– Debt-to-income ratio below 41%
– Minimum contribution of 1% of the primary loan amount
– Home cost lower than $271,164
– Earn within 80% of the local adjusted median income
– Home buyer education course Best For – Low-income buyers without adequate savings for a down payment

The second LHC Mortgage Revenue Bond program is HOME/MRB. Just like the Assisted program, it offers a 30-year, fixed rate mortgage at below-market interest rates as well as a forgivable second loan to help with down payment and closing costs. With a HOME/MRB loan, interest rates are only 3.75% and the second loan is worth between 5-9% of the original loan amount. At the time of purchase, you only need to contribute 1% of the home’s price, or $1,500 – whichever is lower.

Since it has better benefits, it isn’t surprising that HOME/MRB has stricter eligibility requirements. Your household must earn within 80% of the local average median income and you must have a debt-to-income ratio lower than 41% on top of the 640 credit score requirement. You will also have to pay a $75 code compliance fee and $150 inspection fee. Again, these are small amounts when compared to the long-term program savings.

LHC Market Rate GNMA Program Pros – Reduced interest rates
– Up to 4% down payment assistance
– No fees
– Potential to combine with a Mortgage Credit Certificate tax credit to save even more Cons – Meet lender and FHA, VA, or USDA requirements Eligibility – Credit score of at least 640
– Earn within 115% of the local adjusted median income
– Home buyer education course Best For – Low- and mid-income buyers looking for better rates on federal-backed loans

LHC also has a Market Rate GNMA Program, which offers 30-year, fixed-rate FHA, VA, or USDA mortgages at reduced interest rates. Buyers can feel at ease purchasing a federal-backed loan, but remember that means qualifying for both programs.

The 640 credit score minimum and LHC location-specific income requirements trump lower credit score or looser income requirements associated with the federal programs. On the bright side, Market Rate GNMA participants qualify for 4% down payment assistance on top securing of reduced interest rates for first-time home buyer programs.

Perhaps best of all, you won’t have to pay any origination or discount fees to qualify. As with all LHC programs, you will have to complete a home buyer education course and learn the rights, privileges, and responsibilities of homeownership.

LHC Preferred Conventional Program Pros – Low down payment requirement
– Reduced interest rates
– Reduced private mortgage insurance costs
– Up to 4% down payment assistance
– No fees
– Potential to combine with a Mortgage Credit Certificate tax credit to save even more Cons – Maximum loan amount of $417,000 Eligibility – Credit score of at least 640
– Down payment of at least 3%
– Earn less than $99,000
– Home buyer education course Best For – Mid-income buyers without enough savings for a down payment

As its name suggests, the LHC Preferred Conventional Program is only available for conventional loans. While similar to the FHA program, the maximum loan amount is higher with LHC Preferred Conventional loans than with FHA loans. Compare with other programs, income limits are relatively high. You also won’t have to pay a mortgage insurance premium up-front.

Depending on the type of home you’re getting, you’ll only need to provide 3-5% as a down payment. You can also receive up to 4% down payment and closing cost assistance. The 640 credit score and home buyer education requirements still apply. Like a Market Rate GNMA loan, you won’t have to pay any fees in exchange for the LHC Preferred Conventional Program’s benefits.

LHC Choice Conventional Program Pros – Low down payment requirement
– Reduced interest rates
– Reduced private mortgage insurance costs
– Up to 6% down payment assistance
– No fees
– Potential to combine with a Mortgage Credit Certificate tax credit to save even more Cons – Maximum loan amount of $424,100 Eligibility – Credit score of at least 640
– Down payment of at least 3%
– Earn less than $99,000
– Home buyer education course Best For – Low- and mid-income buyers that can’t contribute any money toward a down payment

LHC Choice Conventional is basically the same thing as LHC Preferred Conventional, just with higher maximum loan limits and an additional 2% upfront assistance if your income allows. That means a whopping 6% of your original loan’s value to help with down payment and closing costs. The program also eliminates the borrower contribution requirement, so you won’t have to put any of your own money down.

Since the Choice Conventional LTV is 97%, you’ll only need to provide 3% as a down payment. The HFA will also cover up to 18% of your mortgage insurance, meaning lower monthly premiums and more money in your pocket. Unique to this program, you may be permitted to own other residential property under the right circumstances.

Delta 100 Program Pros – No down payment requirement
– Very reduced interest rates
– Flexible credit approval
– No private mortgage insurance requirement
– Up to 3% down payment assistance
– Potential to combine with a Mortgage Credit Certificate tax credit to save even more Cons – Maximum loan amount of $242,000 Eligibility – Home in an eligible area
– Minimum contribution of 1% of the primary loan amount
– Earn within 80% of the local adjusted median income
– Home buyer education course Best For – Low- and mid-income buyers in rural areas that lack traditional credit

The Delta 100 Program is only available to low- and mid-income first-time home buyers in the Delta Region along and adjacent to the Mississippi River. Delta 100 buyers can receive up to 100% financing and interest rates as low as 2%. You could also get as much as 3% of the home’s purchase price in closing cost assistance.

This is the only LHC program without a minimum credit score requirement. You just have to demonstrate that you are able, willing, and committed to homeownership. That means taking a home buyer education course and making a minimum investment worth 1% of the home’s price, or $1,500 – whichever is less. Gifts cannot help fund this investment. Since there is no credit requirement, it’s beneficial to have cash reserves and other assets.

LHC Mortgage Credit Certificate Program Pros – Reduced federal tax bill
– Lasts the entire lifetime of the loan until repayment, refinancing, or sale Cons – Only available to buyers with a tax liability Eligibility – Must complete a home buyer education course
– Income limits dependent on household size and home location Best For – Low- and mid-income buyers looking to save on their annual tax bill

In addition to loan and down payment assistance programs, the Louisiana Housing Corporation provides eligible home buyers with a Mortgage Credit Certificate (MCC) to help save even more. Through this program, buyers receive an annual federal tax reduction up to 40% of annual mortgage interest paid with a maximum of $2,000 a year.

You can claim the credit every year for the life of the loan so long as the home remains your primary residence. That means it could save you thousands of dollars over time. Eligibility requirements for the Mortgage Credit Certificate are similar to other LHC programs, including completion of a home buyer education course. The credit can be combined with any Louisiana first-time home buyer program aside from the Mortgage Revenue Bond (MRB) programs. That includes programs that come with down payment assistance.

Tips for New Homeowners

Louisiana first-time home buyer programs
  • Remember that homeowners insurance, property taxes and maintenance costs are all ongoing costs of homeownership in addition to monthly mortgage payments. If you forget to include these costs, you may find yourself in debt prematurely.
  • Don’t be afraid to seek help if you’re having trouble managing your month-to-month finances with the introduction of mortgage payments. The SmartAsset financial advisor matching tool will pair you with up to three certified advisors in your area that have experience doing just this.

Photo credit: ©iStock.com/ElenaNichizhenova, ©iStock.com/CatLane, ©iStock.com/utah778

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