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5 Ways the Government Can Save You Big Bucks on Your First Home

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Itching for the key to unlock your dream of a new house? Here's yet another reason to love your country: The U.S. has plenty of programs and incentives that could make that goal a reality. If you're a first-time buyer -- and even if you're not, in some cases -- there are some government benefits that can help you afford those new digs.

Before we dive deep into the ways the government can help fund your new home, there's a little matter to clear up: your eligibility.

The Department of Housing and Urban Development -- the U.S. agency that oversees all housing matters -- is fond of bolstering the success of first-time buyers. But that doesn't mean you're locked out of options if you've already owned a home. Here's what HUD considers a "first-time home buyer":

  • An individual that hasn't owned a principal residence during the three-year period ending on the date of purchase of a new property. If a spouse meets this test, the couple does, too.
  • A single parent who owned a home only with a former spouse while married.
  • A displaced homemaker who owned only with a spouse.
  • A person that owned a principal residence not permanently affixed to a permanent foundation. (Maybe you owned a tent, RV, or mobile home unit.)
  • Someone who owned a property that didn't comply with state, local, or model building codes -- and couldn't be brought into compliance for less than the cost of constructing a permanent structure.

 

If any (or a few) of those statements sounds like you, these options could make a move even more affordable.

1. Various HUD-funded programs

The folks at HUD grant money to a myriad of different organizations and services that can help first-timers purchase a home. From loan programs that offer lower down payments to special programs for teachers, firefighters, and a few other vocations, HUD's resources are vast and diverse. HUD even offers federal assistance at the state level, so make sure to see if your state is covered.

2. State-specific assistance

In addition to HUD assistance, states such as Illinois, Ohio, and Washington have down payment assistance programs for first-time buyers. Eligibility criteria vary by state, but often factor in your income and the value of the property you're hoping to purchase. If you qualify, you could score financial assistance with down payment and closing costs. You might also net some monetary relief to rehab or improve a property.

3. Military benefits

Active-duty and veteran families might be eligible for a zero-down payment Veterans Affairs home loan. It's part of a benefit program that's helped millions of veterans and military members purchase a home since World War II. While loans typically top out at $417,000, that limit can swell in counties with higher costs of living.

Not only do these loans allow borrowers to sidestep down payments, service personnel can also roll the mortgage insurance of 2.15 points (a point is equal to 1% of the loan amount) into the loan. More and more veterans are using these flexible, $0 down loans to crack the housing market during a time of tight credit and limping wages.

For more information, consult with a VA home loan provider such as Veterans United Home Loans.

4. Loans for Native Americans

Native American first-time buyers can apply for a Section 184 loan, which lets them buy a home with as little as a 2.25% down payment on loans of $50,000 and more. If you need a loan for less, the down payment dips to 1.24%. Unlike traditional loan approvals that are heavily dependent on a borrower's credit score, these hinge on the prevailing market rate.

There is a small catch: Section 184 loans are applicable only to single-family homes that are for a primary residence.

5. Your retirement fund

That trusty tool you're using to fund your golden years can help put a new roof over your head while you're still young(ish). First-time buyers can pull up to $10,000 during their lifetime from their traditional or Roth IRA without being whacked with the 10% early withdrawal penalty.

However, Uncle Sam might come knocking with his hand out. Pull money out of a traditional IRA and expect to shell out some moolah to cover the income tax on the money. Roth IRAs aren't subject to income tax because they're funded with post-tax dough.

Of course, like any government agency, HUD and its local municipality siblings are often tweaking, adding, and (sadly) dropping funding options. So before signing on a purchase offer's dotted line, make sure you investigate eligibility and availability in your area to make homeownership a tad more affordable.

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