It’s a dream for many Americans to purchase a home. But for many New Yorkers, it’s a dream that can seem well out of reach. Despite historically low-interest rates, many buyers, both in NYC and across the country, are struggling to make homeownership a reality. The biggest challenges being high home prices, sluggish wage growth, and limited housing inventory. But as a new year and a new decade dawns, there is optimism that things are about to change. New data from the credit bureau Transunion predicts that somewhere between 8.3 and 9.2 million first-time homebuyers will enter the market between 2020 and 2022. A significant jump from just 6.67 million between 2013 and 2015 and 7.64 million between 2016 and 2018.
Despite a shaky start, it looks like Generation Z is finally entering the race. But challenges remain for many New York buyers, regardless of the current buyer’s market in New York City. One solution would be looking into first-time homebuyer programs. Many of these can provide you with the funds to make a down payment and pay closing costs. Others can provide mortgages with very generous terms regardless of a low credit score. If you’re determined to make this decade the one where you finally attain homeownership, then take a look at these programs available across NY state and NYC.
Table of Contents
Federal First-Time Homebuyer Programs
1. FHA Loans
The first go-to program for most people in need of mortgage assistance will be the FHA loan. They come with low down payment requirements and very generous income and credit requirements. Also, contrary to popular belief, they’re not just available for first-time buyers. Repeat buyers and those looking to refinance their mortgage can also use an FHA loan so long as they meet these eligibility requirements:
- A credit score of at least 500
- A debt-to-income ratio of 50% or less
- 5% down payment if your credit score is 580 or higher
- 10% down payment if your credit score is 500-579
- The property must be your primary residence and meet the FHA’s minimum property requirements
2. USDA Loans
Rural communities aren’t usually what people think of on hearing the words New York. But the Empire State is home to many pristine rural areas. The USDA loan is a zero-down-payment loan available to anyone looking to buy a home in rural New York. But if the thought of living rural doesn’t appeal to you, then you can take heart in knowing that several suburban areas near NYC fall under the USDA’s definition of “rural” New York. To qualify for this zero-down-payment loan, you must meet these eligibility requirements:
- A credit score of at least 620
- Your household income can’t exceed 115% of the median income of the area you chose to live in
- Your debt-to-income ratio can’t be more than 29%, but this exact ratio may vary from one lender to another
3. VA Loans
Are you a U.S military veteran or currently serving in the armed forces? If so, then the first program you should look at is VA loans. These loans are provided by traditional lenders but come backed by the U.S Department of Veteran Affairs. So long as you meet their requirements, you can be, approved for a zero-down-payment loan with no private mortgage insurance (PMI). Even if you have a low credit score and low-to-moderate income, you can still qualify for these loans. Additionally, the VA also puts a limit on how much private lenders can charge you in closing costs.
However, there will be a VA funding fee, the cost of which varies depending on your service record and whether you’ve taken out a VA loan before. Check out our article on VA loans to learn if you’re eligible and how you can apply.
4. Good Neighbor Next Door Program
Are you a police officer, firefighter, teacher, or emergency medical technician (EMT)? If so, then you need to check out the Good Neighbor Next Door program. Created by the Department of Housing and Urban Development (HUD), this program aims to provide New York’s public servants with affordable housing in specially designated revitalization areas.
While the program doesn’t offer mortgages, it does provide successful applicants with a flat 50% discount off the listing price on any homes in these designated areas. However, the catch is that you’re likely to face a very competitive application process.
5. Fannie Mae/Freddie Mac
In compiling their statistics on the number of buyers set to enter the market in the next three years, Transunion also discovered the shocking fact that most young buyers are unaware of Fannie Mae and Freddie Mac. There are two of the most significant players in the mortgage industry and can be a huge help to buyers with bad credit and low-to-medium income. One of the most effective programs for New York buyers is the Home Possible initiative. It allows buyers to qualify for a mortgage regardless of their credit score so long as they can make a 3% down payment. However, you must meet income limits, which vary by area and set annually. You’re also limited in your property options to 1-4 family units, condos, and planned-unit developments.
Despite those limitations, Freddie Mac does come with very generous repayment terms. For a start, you can cover down payments with money from friends and family, something that’s not possible with conventional mortgages. Additionally, you can cancel your PMI once you’ve paid off 20% of the property’s appraisal value.
Through Fannie Mae, you can also apply for a similar program called HomeReady. However, this 3% down payment loan requires a credit score of at least 600. There are also income limits based on the area you wish to live in.
6. NADL
Native Americans who have served in the U.S military will want to look into the Native American Veteran Direct Loan (NADL) program. The VA issues these loans for Native American veterans and their spouses in some cases. They come with zero-down payment, a fixed interest rate of 4.75%, and a loan maximum of $424,100 in most areas. The VA will also aim to keep closing costs as low as possible for purchases on these loans.
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New York State First-Time Homebuyer Programs
1. State of New York Mortgage Agency (SONYMA)
Several first-time homebuyer programs are available to residents of the Empire State through SONYMA. However, the first-time buyer requirement is waivered if you are a U.S military veteran or buying a home in a federally designated target area. These “target areas” being economically disadvantaged areas where homeownership may provide a boost to the local quality of life.
Most of these programs come with a 30-year fixed-rate mortgage, down payments that can be as low as 3%, and interest rates that go as low as 4.375%. While each program has its only requirements, most of them require the following qualifications:
- A debt-to-income ratio of no more than 45%
- Two-years employment history
- Completion of a SONYMA education course
- A minimum of three lines of credit that have been active for 18 of the past 24 months – and paid on time
- Must meet income and home value requirements depending on location and type of program chosen
The SONYMA programs are as follows:
Achieving the Dream
Successful applicants of this program can secure a 30-year fixed-rate mortgage with an interest rate between 4.250% and 4.625% depending on your down payment. Applicants must meet income requirements and be able to prove steady employment. PMI will be required if you can’t make a down payment of at least 20%.
Conventional Plus Program
This program offers a 30-year fixed-rate loan for those purchasing a primary home or refinancing. Depending on your down payment, interest rates are around 5.750%. The down payment for a 1-2-unit home is only 3% if you have a credit score of at least 620. For a 2-4-unit home, you’ll need a credit score of 680.
FHA Plus Program
Available for both first-time buyers and existing buyers, the FHA Plus program comes with both an FHA mortgage and SONYMA down payment assistance. While applicants will have to pay 1% of the required 3.5% down payment, the remainder can be covered through a down payment assistance loan.
Low-Interest Rate Program
This program provides a 30-year mortgage for low-income families that are also first-time buyers. It comes with a very generous low-interest-rate though not as low as the Achieving the Dream program. Learn more
Down Payment Assistance Loans (DPAL)
Any SONYMA program can be, combined with a DPAL, which will be structured as a second mortgage. It comes with no interest rate and no repayments so long as the borrower continues living in the home for at least ten years. Learn more
Homes for Veterans Program
Both current and former members of the U.S military may qualify for this program, even if it’s not their first home purchase. Most applicants will receive lower than average interest rates and down payment assistance. Learn more
RemodelNY
If you’re looking to buy a fixer-upper, the RemodelNY loan can provide the funds both to purchase and remodel all in one.
Energy Star Labeled Homes Program
If you’re buying new construction or building your own home, you can apply for this program. It provides you with energy-efficient upgrades that can make your house a green home. Learn more
Graduate to Homeownership Program
Recent college graduates can receive down payment assistance, favorable interest rates, and homebuying education through this program. However, applicants can only receive this program if they plan to purchase in a specified New York Community that is, slated for downtown revitalization. Applicants must also have good credit, stable employment, and be able to make monthly mortgage payments.
NYC First-Time Homebuyer Programs
HomeFirst Down Payment Assistance (available in all NYC boroughs)
The HomeFirst program is a grant available to anyone purchasing a 1-4-unit family home, condo, or co-op in one of NYC’s five boroughs. Successful applicants will receive a $40,000 grant to go towards the down payment or closing costs. This grant is in the form of a forgivable loan, meaning you won’t have to pay it back so long as you occupy the home for at least ten consecutive years. In addition to a meeting, homebuyer programs require applicants; contribute some of their funds towards the purchase.
HomeFirst Down Payment Assistance in NYC
Many states and large cities offer down payment assistance to first-time homebuyers. New York City is no exception once such a program is the HomeFirst Down Payment Assistance Program offered by the city’s Housing Preservation & Development (HPD) agency.
Since we have an aversion to people wasting a money-saving opportunity, we provide a detailed explanation to see if this is program is a fit for you.
The HomeFirst program requirements
You must qualify for specific criteria to be approved for the Homefirst downpayment assistance. First, there are income requirements, which depend on your family size. A four-person household’s income is limited to the low-$60,000 range.
Unfortunately, this knocks many people out. However, there are circumstances where this might fit, such as if you are starting out and feel your income is set to rise, or you have taken a pay cut that you believe is temporary.
Eligibility
If you meet the income eligibility, the rest of the requirements are not responsible. Remember, the program is only for first-time homebuyers. You also must complete a homebuyers education course that is taught by an HPD approved counseling agency, and the home you are planning to purchase must pass a Housing Quality Standards inspection. Beyond that, you must be able to make a financial contribution to the down payment or closing costs.
You can purchase a broad range of properties. It encompasses a one-to-four family home as well as a condo and co-op unit in any of the five boroughs. The city is not interested in subsidizing a rental business, so you must occupy the residence. You must live there for a period of at least ten years and up to 15 years, depending on your income, based on the Area Median Income (AMI). If your income is up to 80% of the AMI, you must reside at the property for at least ten years, and 15 years for amounts greater than this threshold. For a family of four, 80% of the AMI was $72,500.
If you meet the requirements and go through the process, you are eligible for up to $25,000 to apply towards your closing costs or down payment.
Not home free
You still must qualify for a mortgage. The educational course should help you determine your options and what you can do to repair your credit score if needed. There are also additional online courses offered by HPD. Not required, but you may find these informational.
You should feel comfortable that the program will remain in place. It was started in 2004 when the federal government launched its American Dream Downpayment Initiative (ADDI). Although ADDI eliminated the HomeFirst Down Payment Assistance Program funded by alternative sources, including city capital funds.
It is merely one program, so do not get discouraged if you are not eligible. Diligent homebuyers can search for federal, state, and other city programs that can assist with an array of areas, such as down payments and closing costs. A buyer’s agent can help you sort through the various options.
Wells Fargo NeighborhoodLIFT Program (only available in Brooklyn, the Bronx, and Queens)
Available through Wells Fargo, the NeighborhoodLIFT program offers a $20,000 grant to go towards down payment assistance. Like the HomeFirst program, it comes in the form of a forgivable loan that lasts five years. For each year that the buyer occupies the home, a portion of the loan forgiven. If the buyer moves out at any time before those five years are up, the remaining balance is due immediately.
Unfortunately, all funds for the program have committed at this time. But that may change in the future, so keep an eye on the home buyer program for any developments.
Your Next Step
If any of these programs look like a good fit for you, then take the next step and contact them. Ask about any further eligibility requirements and make sure you fully understand the terms and conditions before you apply. When choosing a mortgage lender, make sure they have experience with the type of program you’ve chosen. Additionally, talk with your buyer’s agent about the program you’re interested in. If the home buyer program has property requirements, they should be able to help you find one that matches those requirements.
