How Has COVID-19 Impacted First Time Home Buyer Programs

For many across the country, COVID-19 had made it difficult for FHA borrowers to pay their mortgages on time, particularly FHA borrowers who are typically low-to-moderate income borrowers with federally-backed mortgages. In the second quarter of 2020, the seasonally adjusted delinquency rate was 8.22%, a 4% increase over the previous quarter, according to the Mortgage Bankers Association. This represents the biggest jump in delinquency rates since the Mortgage Bankers Association began conducting its National Delinquency Survey in 1979.

For others, record-low mortgage rates have put homeownership almost in reach. The good news? If you also use a first time home buyer program, this pandemic might just give you a silver lining in the form of a new home. 

So what first time home buyer grants and programs are there to help? 

FHA Loans

FHA loans are a popular option among first-time homebuyers. Their low down payment and credit score requirements make it easy for many to qualify. While the credit score guidelines set by the FHA haven't changed, lenders may insist on a higher credit score during the pandemic now that borrowers are at a higher risk of becoming delinquent due to job losses. In fact, the number of first-time homebuyers taking out FHA loans during April decreased by 36%. 

Down Payment Assistance Programs 

Just about every state and even some cities have a down payment assistance program for first time home buyers. Most of these programs require the borrower to take a first-time homebuyer education course. Typically, these are done in person, but during the pandemic, most have been moved to an online platform. These programs tend to target specific areas in the state where local officials want to encourage first-time homeownership. Sometimes these are grants and sometimes they're more like an interest-free loan that covers your down payment. You'll likely need to agree to live in your home for a certain number of years in order to receive the full benefits of the program. 

USDA Loans

USDA loans are designed to help borrowers purchase homes in rural areas. They offer no money down loans that are contingent on your income level, your credit score, and the location of the property. Each state has its own specific requirements, so be sure to check in on the USDA website

Good Neighbor Next Door Program

It's no secret that first responders, teachers, and other public servants have played an absolutely vital role through the pandemic. The Good Neighbor Next Door program is a HUD program that is designed to help people in these roles buy homes in revitalization areas if they agree to live in the home for three years. While the program hasn't changed due to COVID-19, it's still a great opportunity to take advantage of low mortgage rates and become a homeowner. 

How to Get a First Time Homebuyer Grant

So you're probably wondering how to get one of these grants. 

  1. Do your research. National programs like these are great, but you can also tap into state and local programs in the area where you want to buy. 
  2. Get your credit in order. Most programs have credit score requirements of 500 or more. Individual lenders may require a greater score due to COVID. 
  3. Go through our first-time buyer guide. Your lender and realtor can help you through the process, but its always better to know what to expect before you get started. 

If you're lucky enough to have kept your job security through the pandemic, now might be the best time to start looking for a new home.