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Louisiana first-time home buyer programs

No matter where you hope to live in Louisiana, you’ll never be far from great music, delicious food and exciting activities. Unfortunately, picking a mortgage is much harder than picking a neighborhood, but first-time homebuyer program could help. Both the federal and Louisiana state governments sponsor several first-time homebuyer programs that make home ownership easier and more affordable for all kinds of would-be borrowers. If you need help deciding, use the SmartAsset financial advisor matching tool to access local financial experts.

Federal First-Time Homebuyer Programs

FHA Loans

Pros – Low down payment requirement
– Flexible credit approval
Cons – Applicants with low credit scores may need to make higher down payments
Eligibility – Credit score of at least 500
– Down payment of at least 3.5%
Best For – Buyers without a clean credit history or sufficient savings for a down payment

The FHA loan program is one of the most popular first-time homebuyer programs in Louisiana. So, what is an FHA loan? Backed by the Federal Housing Administration (FHA), these loans are distributed by local, third-party lenders in the state. They come with lower interest rates but the biggest benefit is a low down payment requirement.

Rather than the usual 20%, borrowers only need to cough up 3.5% of the home’s value at the time of purchase. Better yet, FHA loans are available to almost all potential borrowers. You need a FICO® credit score of 580 to receive the down payment perk in its full glory, but you can still qualify if your score falls below that benchmark. You’ll need to make a down payment closer to 10%, but that’s still half the usual amount.

VA Loans

Pros – No down payment requirement
– No private mortgage insurance requirement
– Usually comes with reduced closing costs
Cons – VA funding fee
– Long application process
Eligibility – Credit score of at least 620
– Current and former military members and their spouses or other beneficiaries
Best For – Veterans without enough income or savings to afford a down payment

Arguably, veterans and active members of the military are more worthy of the American Dream than anyone else. The Department of Veterans Affairs developed VA loans to help. The department backs these loans, but several mortgage lenders throughout Louisiana actually issue them.

Since many veterans don’t earn enough monthly income or have sufficient savings to afford a down payment, VA loans do not make you pay one. Plus, since the government will back part of your risk, you also won’t have to get private mortgage insurance (PMI).

To qualify for these impressive perks, veterans need a credit score of at least 620. You also need to contribute 1.25-2.4% of your home’s value into the VA fund, depending on the size of your down payment (should you choose to make one at all). VA loans usually come with low closing costs too, leaving even more money in your wallet.

USDA Loans

Pros – No down payment requirement
– Flexible credit approval
Cons – Applicants that can qualify for a conventional mortgage won’t be accepted
– Only available in select areas
Eligibility – Adjusted household income must be equal to or less than 115% of the area median income
– Home in an eligible area
Best For – Low- and mid-income buyers willing to live in a rural or semi-rural area

The United States Department of Agriculture (USDA) sponsors “Section 502 Single Family Housing Guaranteed Loan Program.” Also known as USDA mortgages, these loans attract new homebuyers to rural and semi-rural communities throughout the state. So long as you have a decent credit history, they completely eliminate the need for a down payment.

To qualify, your household income must be within 115% of the area median income. You also have to prove that you are unable to secure a conventional mortgage. Don’t worry if your score falls a bit lower on the FICO® scale. You’ll just have to pay a down payment around 10% of your home’s value. At half the standard down payment size, it’s still a big improvement from most homebuyer’s experience.

Good Neighbor Next Door Program

Pros – 50% flat discount on home price
Cons – Only available in select areas or for certain professionals
Eligibility – Remain in home at least three years
– Police officer, firefighter, emergency medical technician or pre-K through 12th grade teacher
Best For – Public servants without enough income or savings to afford a home

The U.S. Department of Housing and Urban Development‘s (HUD) Good Neighbor Next Door Program is not a loan. It rewards police officers, firefighters, emergency medical technicians, and teachers with a 50% discount off the listing price of a home in a HUD-designated “revitalization” area. Borrowers may still need a conventional, VA, or FHA mortgage to finance the rest of the home. You could also pay cash.

In addition to having a certain job and buying a home in a certain area, you must also agree to live in the home for at least three years after the purchase. On the bright side, you can sell the home and retain any equity and profit once the three years are up.

Fannie Mae/Freddie Mac

Pros – Low down payment requirement
– Flexible credit approval
– Cancellable private mortgage insurance
– Multiple loan types available
Cons – Higher rates than other federal programs
Eligibility – Earn within location-specific income requirements
Best For – Buyers that need a low down payment option but don’t qualify for other federal programs.

You’d only need a 3% down payment and 620 credit score to secure a Fannie Mae’s HomeReady® loan. To qualify, you must also earn an income at or near the U.S. median. Though you need private mortgage insurance at the time of purchase, you can cancel it once you’ve accrued 20% equity in your new home.

Freddie Mac offers the Home Possible 95% LTV loan with a 3% down payment. With a Home Possible loan, you can choose both the length (15 or 30 years) and terms (5/5, 5/1, 7/1 or 10/1 adjustable-rate) of the loan. It also has the cancelable private mortgage insurance that comes with a Fannie Mae HomeReady loan. Perhaps best of all, you won’t need a strong (or any) credit history to qualify. A Home Possible Advantage mortgage is essentially the same thing, but it always comes with fixed rates and has credit requirements.

NADL

Pros – No down payment requirement
– No private mortgage insurance requirement
– Flexible credit approval
– Usually comes with reduced closing costs
Cons – Only available in select areas
Eligibility – Home in an eligible territory
– Current or former military member of Native American descent and their spouses or other beneficiaries
Best For – Native American veterans that don’t have the necessary income or savings to afford a down payment

Native American Direct Loans (NADL) from the Department of Veteran Affairs are designed specifically for Native American veterans and their families. Some NADL benefits, like reduced closing costs and withdrawal of the private mortgage insurance requirement, are extended from regular VA loans. Along the same lines, an NADL can also cover up to 100% of your home’s value.

What sets NADLs apart is the set interest rate, which is currently 4.75% . To make things even better, you do not need a strong credit history to qualify. Just remember that the home must be located on allotted lands, Alaska Native corporations, Pacific Island territories or federally-recognized trusts.

Louisiana First-Time Homebuyer Programs

Louisiana first-time home buyer programs

Single Family Homeownership Programs from the Louisiana Housing Corporation (LHC) help low- and mid-income Pelican Staters purchase their first home. All LHC mortgages are 30-year, fixed-rate loans with below-market interest rates. They’re administered through approved third-party lenders. The organization also provides down payment assistance grants and mortgage tax credits to make homeownership even more affordable. Any buyers that haven’t owned their primary residence in the last three years, have a credit score of at least 640, and complete a homebuyer education course are eligible to participate. In some cases, income and purchase price limits also apply. Learn more below.

LHC MRB Assisted Program

Pros – Reduced interest rates
– Up to 4% down payment assistance
Cons – Code compliance fee
Eligibility – Credit score of at least 640
– Home cost lower than $271,164
– Income limits dependent on household size and home location
– Homebuyer education course
Best For – Low- and mid-income buyers without adequate savings for a down payment

LHC’s Mortgage Revenue Bond sponsors two different programs. The first, MRB Assisted, offers a 30-year, fixed rate mortgage at below-market interest rates (currently 4.875%) as well as a forgivable second loan to help with down payment and closing costs. With an Assisted loan, this second loan is worth up to 4% of the original loan amount.

The loan is subordinate to the original mortgage lien. It is also forgiven at a rate of 1/36 per month so long as you remain in the home and do not refinance or pay off your mortgage within 36 months. In other words, you won’t have to pay the second loan back as long as the home is still your primary residence and you’ve made mortgage payments on the original loan for three years. You will have to pay a $75 code compliance fee, but that’s a small dent in the lifetime savings of the program.

 

LHC Market Rate GNMA Program

Pros – Reduced interest rates
– Up to 4% down payment assistance
– No fees
– Potential to combine with a Mortgage Credit Certificate tax credit to save even more
Cons – Meet lender and FHA, VA, or USDA requirements
Eligibility – Credit score of at least 640
– Earn within 115% of the local adjusted median income
– Homebuyer education course
Best For – Low- and mid-income buyers looking for better rates on federal-backed loans

LHC also has a Market Rate GNMA Program, which offers 30-year, fixed-rate FHA, VA, or USDA mortgages at reduced interest rates. Buyers can feel at ease purchasing a federal-backed loan, but remember that means qualifying for both programs.

The 640 credit score minimum and LHC location-specific income requirements trump lower credit score or looser income requirements associated with the federal programs. On the bright side, Market Rate GNMA participants qualify for 4% down payment assistance on top securing of reduced interest rates for first-time homebuyer programs.

Perhaps best of all, you won’t have to pay any origination or discount fees to qualify. As with all LHC programs, you will have to complete a homebuyer education course and learn the rights, privileges, and responsibilities of homeownership.

LHC Preferred Conventional Program

Pros – Low down payment requirement
– Reduced interest rates
– Reduced private mortgage insurance costs
– Up to 4% down payment assistance
– No fees
Cons – Maximum loan amount of $417,000
Eligibility – Credit score of at least 640
– Down payment up to 4%
– Earn less than $99,000
– Homebuyer education course
Best For – Mid-income buyers without enough savings for a down payment

As its name suggests, the LHC Preferred Conventional Program is only available for conventional loans. While similar to the FHA program, the maximum loan amount is higher with LHC Preferred Conventional loans than with FHA loans. Compare with other programs, income limits are relatively high. You also won’t have to pay a mortgage insurance premium up-front.

Depending on the type of home you’re getting, you’ll only need to provide 3-5% as a down payment. You can also receive up to 4% down payment and closing cost assistance. The 640 credit score and homebuyer education requirements still apply. Like a Market Rate GNMA loan, you won’t have to pay any fees in exchange for the LHC Preferred Conventional Program’s benefits.

LHC Choice Conventional Program

Pros – Low down payment requirement
– Reduced interest rates
– Reduced private mortgage insurance costs
– Up to 4% down payment assistance
– No fees
Cons – Maximum loan amount of $424,100
Eligibility – Credit score of at least 640
– Down payment of at least 3%
– Earn less than $99,000
– Homebuyer education course
Best For – Low- and mid-income buyers that can’t contribute any money toward a down payment

LHC Choice Conventional is basically the same thing as LHC Preferred Conventional, just with higher maximum loan limits and an additional 2% upfront assistance if your income allows. That means a whopping 6% of your original loan’s value to help with down payment and closing costs. The program also eliminates the borrower contribution requirement, so you won’t have to put any of your own money down.

Since the Choice Conventional LTV is 97%, you’ll only need to provide 3% as a down payment. The HFA will also cover up to 18% of your mortgage insurance, meaning lower monthly premiums and more money in your pocket. Unique to this program, you may be permitted to own other residential property under the right circumstances.

Delta 100 Program

Pros – No down payment requirement
– Reduced interest rates
– Flexible credit approval
– No private mortgage insurance requirement
– Up to 3% closing cost assistance
– Potential to combine with a Mortgage Credit Certificate tax credit to save even more
Cons – Maximum loan amount of $242,000
Eligibility – Home in an eligible area
– Minimum contribution of 1% of the primary loan amount
– Earn within 80% of the local adjusted median income
– Homebuyer education course
Best For – Low- and mid-income buyers in rural areas that lack traditional credit

The Delta 100 Program is only available to low- and mid-income first-time homebuyers in the Delta Region along and adjacent to the Mississippi River. Delta 100 buyers can receive up to 100% financing and interest rates as low as 2%. You could also get as much as 3% of the home’s purchase price in closing cost assistance.

This is the only LHC program without a minimum credit score requirement. You just have to demonstrate that you are able, willing, and committed to homeownership. That means taking a homebuyer education course and making a minimum investment worth 1% of the home’s price, or $1,500 – whichever is less. Gifts cannot help fund this investment. Since there is no credit requirement, it’s beneficial to have cash reserves and other assets.

LHC Mortgage Credit Certificate Program

Pros – Reduced federal tax bill
– Lasts the entire lifetime of the loan until repayment, refinancing, or sale
Cons – Only available to buyers with a tax liability
Eligibility – Must complete a homebuyer education course
– Income limits dependent on household size and home location
Best For – Low- and mid-income buyers looking to save on their annual tax bill

In addition to loan and down payment assistance programs, the Louisiana Housing Corporation provides eligible homebuyers with a Mortgage Credit Certificate (MCC) to help save even more. Through this program, buyers receive an annual federal tax reduction up to 40% of annual mortgage interest paid with a maximum of $2,000 a year.

You can claim the credit every year for the life of the loan so long as the home remains your primary residence. That means it could save you thousands of dollars over time. Eligibility requirements for the Mortgage Credit Certificate are similar to other LHC programs, including completion of a homebuyer education course. The credit can be combined with any Louisiana first-time homebuyer program aside from the Mortgage Revenue Bond (MRB) programs. That includes programs that come with down payment assistance.

Tips for New Homeowners

Louisiana first-time home buyer programs

  • Remember that homeowners insurance, property taxes and maintenance costs are all ongoing costs of homeownership in addition to monthly mortgage payments. If you forget to include these costs, you may find yourself in debt prematurely.
  • Don’t be afraid to seek help if you’re having trouble managing your month-to-month finances with the introduction of mortgage payments. The SmartAsset financial advisor matching tool will pair you with up to three certified advisors in your area that have experience doing just this.

Photo credit: ©iStock.com/ElenaNichizhenova, ©iStock.com/CatLane, ©iStock.com/utah778

Liz Smith Liz Smith is a graduate of New York University and has been passionate about helping people make better financial decisions since her college days. Liz has been writing for SmartAsset for more than four years. Her areas of expertise include retirement, credit cards and savings. She also focuses on all money issues for millennials. Liz's articles have been featured across the web, including on AOL Finance, Business Insider and WNBC. The biggest personal finance mistake she sees people making: not contributing to retirement early in their careers.
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