First-Time Homebuyer Programs in New York
New York boasts a wide array of scenic locations ranging from the Catskills to the Adirondacks to the Hamptons. Many first-time homeowners decide to settle down in New York to take advantage of what nature has to offer. With it taking up to twelve years to save for a down payment in places like New York City, other locations across the state vary in affordability.
Living in New York is a dream for many, but purchasing a property can be financially challenging. The State of New York Mortgage Agency (SONYMA) offers a range of first-time homebuyer’s loans to help acquire a home.
Who is a First-Time Homebuyer in New York?
First-time homebuyers are individuals and families who have not owned property in the last three years. To qualify for state-based aid, you will have to fulfill additional requirements.
Who is Eligible to Apply for Credit in New York?
The following are the requirements needed to qualify for some programs:
- Meet purchase price and household income limits.
- Have stable employment.
- A good credit score
- Must occupy the property as your primary residence
- Successful completion of a home buying counseling course.
SONYMA Loan Programs for First-Time Homebuyers in New York
First-time homeowners purchasing property in New York can utilize the following programs:
Graduate to Homeownership Program
Graduates from an associate’s, bachelor’s, graduate, or doctoral program are eligible for this first-time homebuyer program that offers a competitive 30-year, fixed-rate mortgage. The loan can be combined with other down payment assistance and remodeling programs.
The program is only available in specified areas and can make monthly mortgage payments.
Energy Star Labeled Homes Program
First-time homeowners looking to purchase a newly constructed home may be eligible to receive down payment assistance of up to three percent of the purchase price, not to exceed $15,000. To qualify for Energy Star’s program, you must purchase a newly constructed single-family home, or a double family home in a targeted area and install Energy Star’s products, which typically improve efficiency by twenty to thirty percent. An Energy Star inspector will also have to approve the home during the building process.
SONYMA FHA Plus Program
First-time and repeat homebuyers can use this program to acquire a thirty-year FHA mortgage and down payment assistance. Applicants must contribute 1% of the purchase price towards the 3.5% down payment and complete a homeowners education program.
Conventional Plus Program
First-time and repeat homebuyers can use the Conventional Plus Program to combine a 30-year, fixed-rate mortgage which supplies funds for a down payment and closing costs. The program offers a lower monthly payment than competitors. Income limits do apply and loan amounts have a maximum dependent on family size.
Neighborhood Revitalization Program
First-time and repeat homebuyers who aim to purchase homes that need repairs can receive financial assistance through this program. The program provides down payment assistance that can be the greater of $3,000 or three percent of the purchase price, not to exceed $15,000. Assistance is provided as a second loan with a ten-year term that has no interest and does not require monthly payments. If you live in the property for ten years, you will not have to pay back the loan.
The program provides a further $20,000 in assistance to help with the repairs on the home. This assistance has the same terms as the down payment assistance, and the repairs have to be considered necessary. Borrowers can use outside programs for additional aid if needed.
Down Payment Assistance Loan
This down payment assistance program can be combined with a SONYMA loan to provide the greater of either $3,000 or three percent of the purchase price to use towards a down payment and closing costs, not to exceed $15,000. There is a zero percent interest rate on the loan, and no monthly payments are required over the ten-year term. After ten years, the loan is forgiven, and no payments are required.
Low-Interest Rate Program
First-time homebuyers can utilize the low-interest rate program to acquire a low fixed rate interest loan with a 30-year term. The mortgage covers 97% of the purchase price, and the program also provides three percent of the purchase price to use toward the down payment, not to exceed $15,000.
Applicants must meet the program’s income limits and occupy the home as their primary residence. They also must be employed, have good credit, and provide funds to cover part of the transaction.
Achieving the Dream
This program provides first-time homebuyers with low down payment mortgage financing at a low fixed interest rate. The loan has a 30-year term and finances up to 97% of the purchase price. The program also offers down payment assistance of $3,000 or three percent, not to exceed $15,000.
Borrowers must contribute one percent of the purchase price to the transaction and fulfill the income requirements.
First-time homebuyers who purchase a home that needs repairs can use the RemodelNY program to pay for part of the remodeling. The program provides a minimum of $1,000 to cover repairs and has no maximum. Additionally, recipients can get a loan to cover 97% of the post-remodeling appraised value of the home and down payment assistance of either $3,000 or three percent, not to exceed $15,000.
You must work with a participating lender to acquire this assistance.
Homes for Veterans Program
Veterans, spouses or co-borrowers, and actively serving U.S. military personnel purchasing their first home are eligible for the Homes for Veterans Program. Applicants can receive a mortgage with an interest rate .375% lower than the standard SONYMA interest rate. You can also receive down payment assistance of $3,000 or three percent of the purchase price, not to exceed $15,000.
Borrowers must contribute $1,000 to the transaction.
City Specific First-Time Homebuyers’ Assistance Programs
Some cities also offer first-time homebuyers programs and assistance:
American Dream Down Payment Initiative (ADDI)
This program offers a 30-year low interest loan to those purchasing in Yonkers. The loan provides up to $10,000 with a 3% interest rate to put towards a down payment and closing costs.
You will have to be a Yonkers resident and have consistent employment for two years to qualify. Applicants must provide a minimum of $1,000 towards the transaction.
HomeFirst Down Payment Assistance Program
Through HomeFirst, qualified homebuyers can receive up to $100,000 to use for their down payment and closing costs in New York City. The loan will cover all closing costs and half of the down payment. Recipients must purchase a home within the five boroughs to utilize the program.
You will not have to repay the loan if you live in the home for the duration of the term. Should you no longer occupy it as the primary residence, sell the house for a larger amount than the purchase price, refinance, or provide false information during the application process, you will have to repay a portion of the loan.
First Time Homebuyers
First-time homebuyers purchasing in Buffalo can utilize this program to receive up to $5,000 to use toward their down payment and closing costs. The assistance is provided as a conditional grant, meaning there is no interest and you do not have to repay the loan unless you sell the property within five years.
The property must adhere to the sales price limits and your income must fulfill the requirements.
No matter where you’re thinking of buying your first home in New York, many programs through SONYMA and cities can alleviate the financial stress of your purchase. We recommend reviewing all of your options and consulting with your lender to find the program that best fits your needs. We hope you enjoy house hunting!
Federal Programs for First-Time Homebuyers
There are many first-time homebuyers programs available between federal, state, and local county and city options. You may be able to combine different types of programs to get the best deal on your home. The following federal programs are available for first-time homebuyers across the country.
Various government-backed loans offer low down payments to help first-time homebuyers acquire their home. FHA, USDA, and VA loans all come with little to no down payment and have their list of qualifications that applicants must meet to apply.
Unlike conventional loans, government-backed loans are insured by the government and therefore protect lenders, incentivizing them to give borrowers appealing deals. In other words, government-backed loans usually come with lower lending criteria. Consult with your lender to find out which loan is best for you.
Here are further details on each government-backed loan program:
- FHA Loans – Secured by the Federal Housing Administration (FHA), FHA loans offer a low down payment (down to 3.5% of the purchase price), a low-interest rate, and generally a lower credit score requirement (typically a FICO score of 580) than competing loans.
Learn more: FHA Loans: Requirements and Limits
- USDA Loans – USDA loans are backed by the United States Department of Agriculture (USDA). These loan programs allow borrowers to purchase or build in rural areas for little or no down payment. Several programs differ on loan repayment terms and interest rates, dependent on an applicant’s income.
- VA Loans – Designed to make homeownership possible for veterans, service people, and surviving spouses, VA loans come with favorable terms, including no down payment and limited closing costs. They additionally provide a low-interest rate and do not require Private Mortgage Insurance (PMI).
HomePath by Fannie Mae
This Fannie Mae program allows first-time homebuyers to quickly purchase a Fannie Mae-owned property. Most properties partner with contractors to complete necessary repairs before closing, but buyers may still need to work with an independent contractor for additional renovations and repairs.
Those who buy properties through HomePath and complete Fannie Mae Homeview can receive up to 3% of the purchase price toward their down payment. Recipients can combine this program with a Fannie Mae mortgage.
To qualify, applicants must meet the following requirements:
- Occupy the home as their primary residence within 60 days of the closing,
- Complete a homeownership education course and provide proof of the certificate,
- And the property must be listed on the HomePath system and be eligible for closing cost assistance.
HomeOne by Freddie Mac
First-time homebuyers can apply for a HomeOne mortgage which offers a 3% down payment. Recipients can combine the program with secondary forms of financial assistance to help cover the initial cost of purchasing a home.
The following requirements apply:
- Applicants must complete a homebuyer course,
- Use the program for a 1-unit property, including condominium units. Manufactured homes are not eligible for the program, but CHOICEHome®’s are,
- For those purchasing as a family, at least one person has to qualify as a first-time homebuyer,
- And at least one applicant must have a FICO credit score.
There are no income or geographic restrictions on the program.
HUD’s Good Neighbor Next Door
Through Good Neighbor Next Door, offered by the Department of Housing Urban Development (HUD), teachers (pre-Kindergarten through 12th grade), firefighters, law enforcement officers, and emergency medical technicians can receive up to a 50% discount off of homes listed by the program. You will, on top of your primary mortgage, sign a second mortgage and note for the discount amount, which will have zero interest and no monthly payment requirements. The program lists properties for seven days at a time, and listings update weekly.
Applicants must meet the following requirements:
- Live in the home as their primary residence for three years after the purchase
- Purchase an eligible single-family home that is in a revitalization area and listed on the program’s website,
- And must occupy the home for three years after the purchase. Should you not complete the three-year occupancy, you will have to pay part of the discount back.
FHA’s Energy Efficient Mortgage Insurance
Through Energy Efficient Mortgage Insurance, first-time homebuyers can receive a loan to cover the cost of energy-saving upgrades to their home. FHA-approved lenders can offer this program to anyone purchasing or refinancing their FHA loan.
The following requirements apply:
- Applicants must acquire an energy savings report. The cost of the report gets rolled into the loan, so you do not have to pay out of pocket,
- Must qualify for the purchase according to FHA credit score requirements,
- And the total cost of the improvements must be cost-effective, meaning that the total amount spent on the improvements must be less than the expected energy saved throughout the improvements’ lifespan.
Learn more: What is a Mortgage? – Part One
State Programs for First-time Homebuyers
Along with federal programs, individual states offer their forms of assistance to first-time homebuyers. This guide will break down each state’s programs, but most states provide the following kinds of programs:
Low-Interest Rate Loans
Many states offer 30-year loans with a below-market, fixed interest rate. In addition, most loans come with a low down payment, typically around 3%. These programs will allow you to combine the mortgage with their down payment assistance programs.
Some states offer additional programs for specific groups of people, like teachers in designated areas or graduates from an accredited college or university. Be sure to check out all programs offered in your state to take advantage of any additional offerings for a group you may belong to.
Down Payment Assistance Program (DAP)
Down payment assistance programs provide borrowers with a second loan to help cover the cost of their down payment. Most programs will also offer closing cost assistance. The assistance varies between 3% to sometimes the entire 20%, capping out at a specific dollar amount. The assistance amount varies depending on income levels and the area you purchase property in.
The DAP may require repayment with an interest rate equivalent to the primary mortgage. Or, the program will defer the loan, and borrowers will not have to repay should they occupy the home as their primary residence for a specified time.
Programs for Veterans
Many states offer assistance to first-time homebuyers who are active military personnel, members of the National Guard, veterans, or spouses of veterans. The type of assistance varies by program and either comes as a low-interest loan (typically lower than the state’s already provided low-interest-rate programs) or down payment assistance.
Neighborhood Revitalization Programs
This type of program is typically available to first-time and repeat homebuyers who are purchasing homes that need significant repairs. To compensate for acquiring a home that is otherwise considered unlivable, this type of program will provide financial assistance to cover the cost of repairs.
The assistance method varies: sometimes, it is rolled into the mortgage amount, and other times offered as a grant that does not have to be repaid. Typically, applicants must prove that the repairs are necessary to occupy the home.
Mortgage Credit Certificate (MCC)
A mortgage credit certificate is a dollar-for-dollar federal tax credit that first-time homebuyers can claim for each year they live in their home. Recipients can claim a percentage of the annual interest paid on their mortgage, not to exceed $2,000, as a credit.
You can file the application when you complete your taxes or update your W-4 tax withholding to reduce the amount deducted from your paychecks. Typically this type of program does not restrict applicants to a specific type of mortgage or financing option; it can be combined with most loans. Income and purchase price limits usually apply, and applicants will need to occupy the home as their primary residence to qualify for the credit.
County and City Based Programs
In addition to federal and state-based programs, counties and towns sometimes offer first-time homebuyer programs to residents or those planning to move to the area. These programs typically provide low-interest mortgages or down payment assistance to help cover the cost of purchasing a home. Sometimes local programs also benefit repeat buyers or particular community members, like teachers or local employees.
While each state throughout the guide lists possible county and city-based programs, we recommend that you research to see if the area you are purchasing in offers a program.
The methods of awarding recipients with assistance vary, but most programs have an allocated amount of funds, and you must submit before an application deadline to be considered. Sometimes the programs operate on a rolling basis and consider each application individually. It is imperative that you read the conditions of the application process to ensure you follow the directions and get considered for the program.
The Homebuying Process
What does the process of buying a home actually entail? Read the following for a general timeline and to grasp a better understanding of where you should start the process.
Decide Where You Will Move
Are you moving to another country, state, or town? Or simply deciding to buy a home in the area you’ve been living for a while? Either way, you should have a clear idea of where you will purchase a home.
If you are torn between several locations, we recommend reviewing what the home buying process is like for first-time homebuyers in each area and also briefly looking at listings to find which options are most favorable to you. In terms of affordability, you can consult with our monthly housing affordability index to understand which metropolitan markets are affordable. The index reviews 100 cities each month to see which have the least and most affordable markets.
Get a Sense of Your Financial Situation
A crucial part of the house-hunting process is understanding how much you can afford. When looking at a home’s purchase price, it can be overwhelming to work backward to comprehend what your monthly costs look like.
To understand how much you can spend on your monthly housing costs, you can consider the following:
Debt-to-Income Ratio (DTI)
The amount of your gross monthly income that goes towards your monthly debt expenses. A lower DTI is more attractive to lenders as it plays into calculating the risk of giving you a mortgage. To determine your DTI, divide your total monthly debt payments by your gross monthly income, then multiply by 100 to get the value as a percentage. Click here for more help on calculating your DTI.
Most lenders look for a DTI below 36%, but some lenders may accept a ratio up to 43%. A lower DTI indicates that you are able to take on the mortgage loan and pay it back, which is attractive to lenders as they seek reassurance from borrowers that they will get their money back.
Know (and Raise) Your FICO Credit Score
An important qualification for most mortgages and first-time homebuyer programs will rely on you having a credit score above a certain number. Your credit score is a three-digit number that predicts how likely you will repay your debt. Lenders and programs look for higher credit scores as it ensures that they will receive the money-back that they lent and that you are a trustworthy borrower. Some programs will give you better mortgage rates and incentives if you have a higher credit score.
If your credit score is poor or fair in the early stages of your home buying process, you may want to delay your search for a bit longer and work to improve your score. Paying off debts, lowering the amount of available credit you are using at a time, disputing any errors, and opening a new line of credit may help boost your score enough to appeal to lenders and programs.
Potential Monthly Mortgage Payment
You should gauge a general idea of how much money you will spend on your mortgage and housing expenses each month. Your mortgage consists of four components, including the principal, interest, taxes, and insurance (PITI).
After determining how much you can afford to spend each month on your housing expenses, you must consider all aspects of your PITI by calculating your taxes and insurance. There are multiple tools online to help you develop solid numbers for these aspects. Deduct your monthly taxes and insurance amount from your budgeted monthly housing expenses to understand how much you can spend on your principal and interest.
Since mortgage rates fluctuate, you should research the current average rate and then use an online mortgage calculator to get a general understanding of how much you can afford to spend on a purchase price. If mortgage rates are running higher, then you will need to search for a lower purchase price, so your monthly payment does not go over budget.
There are several budgeting models you can use when determining how much to spend on your mortgage. Chase outlines several principles, but the overall consensus is that you should spend no more than 30% of your monthly, pre-taxed income on your mortgage.
Learn more: 50 30 20 Budget: A Guide With Examples
Choose a Mortgage Lender & Get Preapproved
When engaging in this part of the process, it is important to shop around for several different lenders to ensure you get the best possible deal on your purchase. You may qualify for different types of loans, and even if you only qualify for one type, there are still different fees associated with the various types of lenders you may meet with. Even if rates differ at numbers under 1%, that can still equate to thousands of dollars over the course of your loan.
As you decide on which loan options work best for you, there are some factors you should consider:
- Interest rates fluctuate and generally come in at 3 to 4%. To receive a lower interest rate and therefore pay less each month, you can build your credit score and save for a higher down payment.
- Annual Percentage Rate (APR) includes your interest rate and additional fees and closing costs associated with acquiring your loan. It is a wider perspective of all the items you will pay for when taking out a mortgage.
- Private Mortgage Insurance (PMI) is insurance coverage that lenders require when you put down under 20% as a down payment. Your total loan amount and mortgage rate determine your PMI.
Looking to buy soon? Check today’s interest rate and get pre-qualified in 2 minutes.
You should go through the pre-approval process with a selection of lenders you are considering working with. Getting pre-approved will allow you to shop for homes and actually meet with agents, as the pre-approval helps guarantee that you are eligible to move forward in the buying process should you like a home you find.
This stage in the process is where you will also discuss first-time homebuyer programs, as outlined in the remainder of this guide, which you can take advantage of to get a better deal on your mortgage. Discuss all options with potential lenders and then decide which program and lender are best for you.
Learn more: Pre-Qualified vs. Pre-Approved
In this phase, you will also submit documentation to various lenders to receive a loan estimate. While the estimate is not the official approval of your mortgage application, it does provide important information about the costs associated with purchasing a home. You will read through the three-page document, then provide additional information and complete the underwriting process should you decide to proceed with the mortgage.
Find Your Home and Make an Offer
Now comes the fun part, actually looking at homes! Take a look at the available homes in your area and inquire about viewing properties with agents. Once you have found a place you can as your future home, it is time to make an offer. This is where you will discuss with your agent to decide how much you should offer, and they will work with the seller’s agent to accept, deny, or negotiate.
To assist in your home buying process, you may enlist the help of a real estate agent. The agent will show you an assortment of homes based on what you are looking for. Your agent then enters the negotiation stage with ample knowledge and the required skill set to get you the best deal on your purchase. Most homebuyers appreciate working with an agent as they have the industry knowledge and can take some of the workload off of your plate as you embark on the other stages of the home buying process. Find the top real estate agents in your area now.
If the sellers accept your offer, you will make a good-faith deposit. Then the transaction will transfer into escrow, meaning the home is taken off the market for a short time under the assumption that you will move forward with the process should there not be anything seriously wrong with the home.
This is where you will have a home inspection to ensure everything is safe and up to standard. If there is anything significantly wrong with the home, you will either be able to take back your offer or negotiate with the seller to have them fix it or lower the original offer amount to reflect the cost of repairs.
Once the home is inspected and everything is up to standard, you are ready to close on the home. This is where you will get ready to sign a collection of paperwork and cover the additional closing fees to ensure your get the home. Fees can include and are not limited to. things like the title fee, survey fee, property tax, and attorney fees. At the moment, only twenty-two states require the presence of an attorney during a closing.
Before the closing, you may also coordinate a home appraisal, follow up on matters regarding the home inspection as needed, schedule a utility transfer, change your address, and any other additional processes.
Learn more: What Can I Do if My Appraisal Comes in Low?
On average, the closing process takes between thirty to fifty days, and there are several factors that influence the timeline. If you pay in all cash, the transaction takes less time due to less paperwork. As the homebuying process increasingly goes online, this process continues to grow shorter. On the day of the actual closing, you will spend about an hour signing documents.
The closing will take place in person or online. Before the closing date, you should read through the official closing disclosure so you know the exact fees you owe and the exact terms of what you are signing. When it comes time to close, you will sign all the paperwork, get the keys, and then be ready to move into your new home!