SmartAsset: New York First-Time Homebuyer Programs

For New York residents, there are a number of federal- and state-level programs that are designed for first-time homebuyers. These programs can focus on easy-to-meet down payment requirements, specific home locations, low-interest rates and more. A few offerings even cater to specific types of homebuyers, like veterans, teachers or people with lower credit. Regardless of your situation, though, you should be able to find an offering that will help you achieve your dream of becoming a homeowner.

Buying a home is a major financial undertaking. Find a financial advisor who can help you plan for it.

Federal First-Time Homebuyer Programs

FHA Loans

Pros	– You can secure an FHA loan with a credit score of at least 500 – Interest rates usually much lower than those of conventional loans – Down payments as low as 3.5%
Cons	– Insurance premiums – Long appraisal process
Eligibility	– Have a credit score of at least 500
Best For	– Individuals with low-to-moderate income and a low credit score

If your income or credit score hinders you from obtaining a mortgage through conventional means, consider FHA loans. The Federal Housing Administration (FHA) works with lenders throughout New York to help make homeownership a reality for all. It’s one of the most popular New York first-time homebuyer programs.

You can qualify for an FHA loan with a FICO credit score of at least 500. And a score of 580 can usually earn you the best rates. In addition, these loans require a down payment of 3.5%. To give you a better view of that ratio, conventional mortgages typically require down payments of around 20% of the home’s value. Lenders that issue FHA loans allow pretty generous terms when it comes to income and credit requirements. You can still secure an FHA loan if you’ve gone through bankruptcy.

Regardless of credit history, you’d be responsible for loan premiums to protect the lender in the event you default. You can pay these every month or up-front. The FHA also typically sets a strict appraisal and property inspection process. Terms may vary among lenders, so make sure you shop around for the right match.

USDA Loans

Pros	– USDA loans can finance up to 100% of a property’s value – Low-interest rates and little to down payment requirement
Cons	– Area restrictions and income limits – Larger down payments and interest if your credit score falls below 580
Eligibility	– USDA loans can finance up to 100% of a property’s value – Low interest rates and little to down payment requirement
Best For	– Individuals with low to moderate income who want to move to rural New York or certain suburban communities

Not many people think of rural communities when they hear “New York.” But the Empire State is home to several rural areas surrounded by pristine lakes and mountain tops. If you want to live among these vibrant sights, the USDA loan program could be a good match.

The U.S. Department of Agriculture established the USDA loan program to bring more people to America’s countryside, so they can revitalize local economies. But several suburban areas near the Big Apple also fall under the USDA’s definition of “rural” New York.

What are the benefits? Besides the comfort of being away from New York’s noisy metropolis, you can usually secure a USDA loan with zero down payment if your FICO credit score is at least 640. To qualify, however, your household income can’t exceed 115% of the median income for the designated area you plan to live in. Household income generally means the combined earned income of all adults who plan to live in the home.

Furthermore, your lender will consider your debt-to-income ratio to determine how much you can borrow. Typically, your monthly total housing costs can’t be more than 41% of your monthly gross income. But because USDA loan terms tend to be generous across the board, you’d have to pay a low up-front insurance premium. Although these loans are backed by the USDA, they are issued by traditional lenders throughout New York. So be sure to shop around for the best mortgage lenders in New York.

VA Loans

Pros	– Low-interest VA loans with zero down payments available – No insurance component required
Cons	– Low-interest VA loans with zero down payments available – No insurance component is required
Eligibility	– Be a U.S. military veteran or current service member who meets basic VA loan requirements. Spouses and certain beneficiaries of eligible individuals may qualify as well
Best For	– Veterans or service members with adequate credit scores and low-to-moderate income

If you’re a U.S. military member looking to buy a home, the first New York first-time homebuyer program you should cross off your list is the VA loan program.

To ease the path to homeownership for America’s heroes, the United States Department of Veterans Affairs created VA loans. Most veterans and current service members are eligible for these low-interest mortgages. And options with zero down payments are available. The VA backs these loans, but traditional mortgage lenders throughout New York issue them. Plus, the VA sets a limit on how much these lenders can charge in closing costs, which are common among nearly all types of mortgages. Lenders also allow lax rules when it comes to income and credit score requirements.

In addition, taking out a VA loan doesn’t require you to buy private mortgage insurance (PMI) to protect the lender in the event you default. This is a standard piece to nearly all other mortgages.

However, your lender will charge a VA funding fee. The rate varies based on factors such as your military service and whether you’ve taken out a VA loan before. In addition, the appraisal process tied to VA loans usually stretches longer than that of traditional mortgages.

Good Neighbor Next Door Program

Pros	– 50% discount off listing price of a home in a revitalization area
Cons	– 50% discount off the listing price of a home in a revitalization area
Eligibility	– Be a K-12 teacher, EMT, police officer or firefighter – Make property your primary residence for at least three years – Move to a revitalization area
Best For	– Eligible public servants with low-to-moderate income

New York owes a lot to its teachers, police officers, firefighters and emergency medical technicians (EMTs). However, not all areas in the Empire State house enough of these professionals. To change that, The Department of Housing and Urban Development (HUD) created the Good Neighbor Next Door Program (formerly the Teacher Next Door program).

Although the program doesn’t offer mortgages, it provides a flat 50% discount off the listing price of a home in a revitalization area. New York houses some of these zones.

However, you’d likely face a competitive application process. You must undergo a preapproval evaluation from a Good Neighbor Next Door agent. Discounts are also handed out following a random lottery when multiple eligible people apply for a single listing.

Fannie Mae/Freddie Mac

Pros	– Lax income and credit score requirements – Several options to cover down payments – Cancellable PMI
Cons	– Must meet strict income limits unless property is in low-income census tracts
Eligibility	– Meet income and house size requirements unless you’re moving into a low-income census tract
Best For	– Individuals who can’t qualify for mortgages elsewhere

Fannie Mae and Freddie Mac stand as two of the largest players in the mortgage industry. Created by the federal government, these entities also support loans for low- to moderate-income Americans who don’t have the best credit.

In fact, one of the most generous New York first-time homebuyer programs is Freddie Mac’s Home Possible initiative. You don’t even need a credit score to qualify for one of these low-interest loans. Down payment for the Home Possible 97% LTV is 3%. However, you must meet income limits which vary by area and are set annually. Your property options are also mostly limited to one- to four-unit homes, condos and planned-unit developments.

Nonetheless, Freddie Mac gives you some flexibility when it comes to paying off your debt. For instance, you can cover down payments with money from friends and family. This is not the case with nearly all conventional mortgages. Plus, you can cancel your PMI after you’ve paid at least 20% of the home’s appraised value. In addition, you can choose from different types of loans. Home Possible loans are available in fixed-rate options and as adjustable-rate mortgages (ARMs).

Fannie Mae sponsors a very similar program called HomeReady. However, you typically need a credit score of 620 to secure these loans with a 3% down payment. You also can’t make more than the median income for the area you wish to live in. However, Fannie Mae waives this requirement if your potential property rests in low-income census tracts.

NADL

Pros	– Loose credit score and income requirements – No down payment or insurance component required
Cons	– Qualification open to a very niche group – Loans can be used to purchase properties in select areas
Eligibility	– Be a Native American veteran or belong to another select group. Spouses of eligible members may also qualify.
Best For	– Native American veterans with low-to-moderate income

If you’re a Native American who honorably served the U.S. military, there is one New York first-time homebuyer program you definitely need to check out: the Native American Veteran Direct Loan (NADL) program.

The VA issues these loans directly to eligible Native American veterans and other recognized groups as well as their spouses. However, they must be used to purchase property on Federal Trust land and other recognized areas. These loans come with no down payment requirements and a fixed interest rate. The VA usually keeps closing costs lower than those of conventional mortgages.

In addition, the VA allows quite liberal credit scores and income requirements. Eligible applicants can take a loan to purchase a single-family property or build or improve a home in a designated area.

New York First-Time Homebuyer Programs

There are several programs available to you if you are buying a home in the state of New York. Here are the most popular options that you can explore to see if one might be a fit for you.

State of New York Mortgage Agency (SONYMA)

SmartAsset: New York First-Time Homebuyer Programs

The State of New York Mortgage Agency (SONYMA) manages several first-time homebuyer programs. It works with lenders throughout the Empire State to offer mortgages for low-to-moderate-income New Yorkers.

Most options carry 30-year, fixed-rate terms, with down payments dipping as low as 3% and interest terms to match. In addition, SONYMA offers Down Payment Assistance Loans (DAPLs). You can also combine your mortgage with grants and other subsidies.

Depending on the program you choose, you can use these mortgages to buy single-family homes, co-ops and condominiums. Each program has its own requirements. But you generally must meet the following qualifications:

Take a SONYMA education course designed for first-time homebuyers
Have a debt-to-income ratio of 50% or lower
Have at least three lines of credit that have remained open for at least 18 of the past 24 months (paid timely)
Meet income and home value requirements depending on location and type of program you qualify for
Prove a minimum two-year employment history

Achieving the Dream Mortgage Program

Pros	– Low interest rates and down payments – DAPL – No prepayment penalty
Cons	– PMI required for mortgages with down payments less than 20% – Cash contribution worth 1% of property value required
Eligibility	– Meet income and home purchase price requirements – Prove adequate credit history, steady job and income
Best For	– Low-to-moderate income New Yorkers

If you qualify for the Achieving the Dream program, you can secure a 30-year mortgage with an interest rate that’s dependent on your down payment, which can be as low as 3%.

To qualify for the Achieving the Dream loan, you must meet the following requirements:

Be a first-time homebuyer (waived for eligible military veterans and people eyeing homes in federally designated target areas)
Prove a steady job and adequate credit history (non-traditional credit accepted)
Meet income requirements based on location
Consider a home that meets SONYMA’s purchase price limits based on location
Occupy the home as a permanent resident

However, you’d owe a cash contribution worth 1% of the property value. And if your down payment falls below 20%, you’d need PMI.

Nonetheless, SONYMA allows you to take out a Down Payment Assistance Loan, or DPAL. You can use this to fund down payments, closing costs and even PMI. These collect zero interest and require no monthly payments. Moreover, SONYMA forgives these loans after 10 years if you keep your mortgage in good standing.

SONYMA sets DPAL limits to $3,000 or 3% of the home purchase price up to $15,000. However, DPALs can’t exceed full down payment and closing costs. Plus, a DPAL will slightly increase your mortgage interest rate.

To apply to this or other programs run by SONYMA, contact one of the 50 or more lenders scattered throughout the Empire State.

Homes for Veterans Program

Pros	– Eligible U.S. military veterans and active duty personnel don’t have to be first-time homebuyers to qualify – Low interest rates and down payments – Down payment assistance
Cons	– Interest rates slightly higher than those tied to Achieving the Dream loans – Cash contribution worth 1% of home purchase value required
Eligibility	– Be a U.S. military veteran (discharged for reasons other than dishonorable) or active duty service member, a U.S. military member stationed in New York State regardless of discharge status or a first-time homebuyer who is an active duty or honorably discharged National Guardsman or reservist
Best For	– U.S. military veterans or active duty personnel with low to moderate income

SONYMA runs the Homes for Veterans Program. These mortgages are designed to help more U.S. military veterans and active duty personnel achieve the American dream of owning a home. SONYMA also allows eligible borrowers to take out DPALs. However, this program also requires a cash contribution equal to 1% of the property value.

In addition, applicants must provide the following documentation to apply:

Certificate of Release or Discharge from Active Duty (DD214) or Report of Separation and Record of Service (NGB Form 22)
Leave and Earning Statement (Required for active duty personnel)
Military ID Card (Required for active duty personnel)
Military Veteran’s Eligibility Affidavit (SONYMA Form 243 – Required for eligible veterans who aren’t first-time homebuyers)

Energy Star® Labeled Homes Program

Pros	– Properties built with energy-efficient features – Lower interest rates
Cons	– Homes must be thoroughly inspected
Eligibility	– Property must meet extensive Energy Star® requirements
Best For	– People interested in newly-constructed, energy-efficient homes

SONYMA also offers mortgages designed to buy new homes built with energy-efficient applications. You can secure one through its Energy Star® program. According to SONYMA, Energy Star® labeled homes can save homeowners hundreds of dollars a year.

You can use these mortgages to buy newly constructed, one-family homes or a newly constructed two-family home within a SONYMA targeted area.

RemodelNY Program

Pros	– Low interest rates and down payments – DPAL available – Can combine with other programs’ benefits
Cons	– Various fees and “soft” costs
Eligibility	– Meet standard SONYMA requirements
Best For	– Low-interest rates and down payments – DPAL available – Can combine with other programs’ benefits

SONYMA also supports special types of home improvement loans through the Remodel NY mortgage program. These loans help New Yorkers buy and renovate homes in need of repair. With these mortgages, you can finance up to 97% of the “after-improved” appraised value of the property or its purchase price in addition to financeable repairs.

You can still take out DPALs for this program. Plus, SONYMA lets you combine this loan with an Achieving the Dream mortgage. These loans exist under the Achieving the Dream program. So, they carry the same interest rates.

The RemodelNY program covers repair costs at a minimum of $1,000 with no maximum. These loans apply to most non-luxury repairs. SONYMA and your lender should have detailed information.

The acquisition price or the total of the home’s purchase price and cost of repairs as well as “soft” costs (inspection fees, consultant fees, etc.) can’t exceed purchase price limits set by SONYMA. In addition, SONYMA requires a minimum 10% contingency reserve on all loans. SONYMA also oversees draws for renovations, which are taken from an escrow account.

Neighborhood Revitalization Program

Pros	– Can qualify for very low interest rates – Qualification exemptions available for those hit by the foreclosure crisis
Cons	– Property must be in a designated revitalization area
Eligibility	– Meet basic SONYMA requirements – Seek home in a designated revitalization area
Best For	– Low-to-moderate income New Yorkers who don’t mind certain geographic restrictions

The mortgage crisis crippled communities throughout New York. And it left many empty homes in its wake. Today, SONYMA manages the Neighborhood Revitalization Program to help you buy homes after foreclosure.

These loans come in 30-year terms. If you meet certain income requirements, you’ll get the lowest interest rate that’s allowed by any SONYMA program. Down payments can drop to 3%. In addition, you can get up to $20,000 in cash assistance to repair the home you purchase. You can also finance additional improvement costs into your mortgage. SONYMA also allows you to fund repairs with grants and other benefits including RemodelNY loans. However, fees include a charge worth 2.5% of the revitalization mortgage amount.

To qualify, you must meet basic SONYMA standards. However, the organization grants special exceptions for borrowers hit by the foreclosure crisis. In addition, you must undergo counseling from a HomemartNY member. Homes must also be in eligible counties which include New York, Kings and Suffolk. Moreover, you can’t make more than the adjusted median income for the area you want to live in. Loan limits depend on home size.

Graduate to Homeownership Program

Pros	– Low interest loans – DAPL with no interest rate increase
Cons	– Low-interest loans – DAPL with no interest rate increase
Eligibility	– Be a first-time homebuyer – Meet income limits varying by county – Must have graduated within the past four years
Best For	– Recent graduates with low-to-moderate income

SONYMA designed the Graduate to Homeownership program to help recent grads become homeowners in upstate New York.

You can secure a low-interest subsidized loan through the State of New York Mortgage Agency. Your down payment depends on house size and loan amount. It may range from 3% to 10%. However, you can take out a DPAL and see no increase in your mortgage interest rate. SONYMA also allows you to combine this option with grants and other benefits.

However, you must use your mortgage to purchase one to four-family properties in eligible communities in mostly Upstate New York. You must also meet the following requirements:

Be a first-time homebuyer
Home must be your primary residence
Meet region-specific income limits
Have graduated with an associate’s, bachelor’s, master’s or doctorate degree within the past 48 months from a U.S. DoE-recognized college or university

Conventional Plus Program

Pros	– Mortgage refinance options available – Low interest rates
Cons	– Credit score requirements
Eligibility	– Meet standard SONYMA requirements
Best For	– New Yorkers who want to refinance a mortgage or those looking for a new, low interest one

One of SONYMA’s newest homebuyer programs is the Conventional Plus Program. It allows individuals to take out loans to purchase primary homes or refinance mortgages. The program offers 30-year fixed-rate loans.

To secure a 3% down payment on a one- to two-unit home, you’d need a credit score of at least 620. For larger homes, a credit score of 680 may be required. The maximum loan amount depends on family size. You must also meet income limits set by SONYMA depending on location.

FHA Plus Program

Pros	– Mortgages backed by the FHA
Cons	– Slightly higher interest rates than other SONYMA programs
Eligibility	– Meet basic SONYMA requirements – Use mortgage for 1-4 unit homes and be primary resident
Best For	– New Yorkers with moderate income who want to secure a mortgage with a low down payment

The SONYMA FHA Plus program is very similar to the Conventional Plus program. However, the FHA backs this mortgage. Borrowers must take on a minimum 3.5% down payment. You must cover at least 1% with cash, and a DPAL can cover the rest.

Interest rates can be high, though they do vary by loan amount and home size. And because the FHA backs it, lenders typically allow flexible eligibility requirements.

Bottom Line

SmartAsset: New York First-Time Homebuyer Programs

New York residents can take advantage of a number of federal- and state-level programs that can help first-time homebuyers achieve their home buying dreams. These programs cater to specific homebuyers, including veterans, teachers or people with lower credit. Make sure you compare the benefits and requirements before applying.

Tips for First-Time Homebuyers

The purchase of a home will naturally have a major affect on your finances. In turn, you may want to consider working with a financial advisor to create a plan for you and your family’s financial future. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
When planning for the purchase of a home, your principal concern is likely to be whether or not you can afford the price that the home is listed for. However, there are a number of additional costs you’ll need to account for, including property taxes, homeowners insurance, closing costs and more. Stop by SmartAsset’s home affordability calculator to see what you can really afford.

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