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Oklahoma first-time home buyer programs

The state and federal government sponsor various Oklahoma first-time homebuyer programs designed to give everyone the chance to lay their roots here. So don’t feel left out because of low income or a lackluster credit score. Some of these Oklahoma first-time homebuyer programs are designed for people just like you. Others support specific groups like America’s military veterans, teachers and police officers. But if you need help finding the program that’s right for you, use our SmartAsset financial advisor matching tool. It connects you to local financial advisors based on your preferences. These professionals can help you find the best Oklahoma mortgage rates and terms.

Federal First-Time Homebuyer Programs

FHA Loans 

Pros – Low down payments
– No early payment penalty
Cons – Down payment could be high for people with credit scores below 580
Eligibility – Having a credit score of at least 500 usually helps you secure one
Best For – People with adequate credit scores and low-to-moderate income

If your income or credit history hinders you from obtaining a traditional mortgage, you may find a solution through an FHA loan. The Federal Housing Administration developed these loans to help low-income individuals with less-than-stellar credits scores.

In fact, a credit score of 580 can usually help you get an FHA loan with a 3.5% down payment—a rate now virtually unheard of in the conventional mortgage arena. Interest rates also usually dip far below those of conventional mortgages.

But because of a low down payment, you’d face mortgage insurance premiums to back the lender in the case you default. As with nearly any other mortgage, you’d also be responsible for closing costs. Still, these would be lower than you’d face with a conventional mortgage. However, your family, friends and even employment-assistance programs can cover closing costs as well as down payments. This isn’t the case with regular mortgages. However, make sure you keep documentation such as a letter indicating this is gift money and not a loan that you’re expected to pay back.

In addition, some agencies in Oklahoma provide down payment assistance services.

USDA Loans

Pros – Designed for low-to-moderate-income individuals who otherwise couldn’t secure a mortgage
– Low-interest loans that can finance up to 100% of a home’s value
– Backed by the U.S. government, so lenders are less stringent on loan qualifications
Cons – Lower credit scores could mean high interest rates
Eligibility – Must be willing to move to a USDA designated area
– Can’t have household income more than 115% of the median income for the area you wish to live in
Best For – People who make low-to moderate income and are willing to move into a rural or suburban area designated by the USDA.

If you find yourself attracted to Oklahoma’s beautiful rural landscapes or suburban neighborhoods, you may find your way there with a USDA loan. The United States Department of Agriculture backs these mortgages to motivate individuals to move to America’s countryside. But even suburban homes near metropolitan areas fall under the USDA’s radar.

Although the government backs them, traditional lenders throughout Oklahoma issue these mortgages. Due to this arrangement, they usually allow low-interest rates. And you may qualify for no down payment.  To put that into perspective, taking out a conventional mortgage usually requires a down payment worth 20% of the home’s value.

A FICO credit score of at least 640 regularly earns you the best interest rates. You can still qualify for a USDA loan with a lower score or no credit history, but interest rates won’t be as generous. However, they’d still fall below those of conventional mortgages. To qualify, you must move into a single-family home in a designated area. Generally, your household income can’t be more than 115% of the median income in that space.

While the government doesn’t set a maximum borrowing limit for USDA loans, it largely depends on a version of your debt-to-income ratio. For instance, your total monthly mortgage payment can’t surpass 29% of your monthly income before taxes. Total monthly payments comprising your mortgage and all other bills can’t exceed 41% of your monthly income.

The USDA also issues direct loans that usually favor very-low-income individuals, as well as grants designed for home improvement.

VA Loans

Pros – Backed by the U.S. government, so you don’t need to buy PMI
– Can secure low-interest loan with no down payment
Cons – VA funding fee
– Appraisal process usually stretched longer than that tied to a conventional mortgage
Eligibility – Most veterans and current service members of the U.S. military and their spouses are eligible
Best For – Veterans and service members with low-to-moderate income and adequate credit history

Perhaps no one is more worthy of the American dream than those who fought for it. To help make that a reality, the Department of Veterans Affairs developed the VA loan. The department backs these loans, but several mortgage lenders throughout Oklahoma issue them.

To qualify, you must be one of the following.

  • U.S. military Veteran with 90 to 181 days of continuous service
  • Active-duty service member with at least 90 days of continuous service
  • National Guard or Reserve member who has served for at least six years or an honorably discharged member
  • Un-remarried surviving spouse of a veteran or service-member killed in the line of duty or from a service-related incident

VA loans typically carry low interest rates. You can also secure one with no down payment if you have a good credit score and meet other qualifications. In addition, the VA sets a limit on how much lenders can charge in closing costs.

But despite these benefits, you’d face a VA funding fee. This charge can stretch from around 2.15% to 3.3%. It would ultimately depend on several factors including your military service. Whether you had the loan before can also affect this ratio.

Good Neighbor Next Door Program

Pros – Take a flat 50% discount off the price of a home in a revitalization area
– After three years, you can sell the home
Cons – You must live in the home as your primary residence for at least three years
– Competitive selection and appraisal process
Eligibility – Qualification is open to police officers, firefighters, K-12 teachers and EMTs who want to move to a revitalization area
Best For – Eligible applicants with low-to-moderate income

Teachers, police officers, firefighters and emergency medical technicians provide vital services to the people they serve. Unfortunately, not all communities are home to a substantial number of these professionals. The U.S. Department of Housing and Urban Development (HUD) wants to change that with its Good Neighbor Next Door initiative.

However, this program doesn’t provide mortgages. It offers 50% discounts off the listing price of homes in “revitalization areas.” You can cover the rest by getting an FHA, VA, conventional loan or any other type of mortgage you qualify for.

The highly-competitive application process for this program involves preapproval from a Good Neighbor Next Door agent.

Fannie Mae/Freddie Mac

Pros – Several loan and repayment options for low-income individuals
– Very loose credit score requirements
Cons – Some loans come with higher interest rates
Eligibility – Varies based on loan type. But there are virtually no income requirements for loans to buy homes in underserved areas
Best For – Low-income individuals who can’t secure a mortgage elsewhere

Established by the federal government, Fannie Mae and Freddie Mac take a big portion of the mortgage market. They also work with local lenders to issue mortgages for low-to-moderate income Americans.

To meet this goal, Fannie Mae established HomeReady. Through this program, you can secure a low-interest mortgage with a down payment as low as 3%. However, you’d likely need a credit score of at least 620 to obtain a one with the best rates.

Taking out the loan also requires private mortgage insurance (PMI). However, you can cancel it after paying off at least 20% of the mortgage balance. In addition, you’d take on closing costs. But outside sources such as gifts and grants can cover both down payments and closing costs. To qualify, you must meet certain income limits which vary based on county.

Those with credit scores below 620 may be interested in Freddie Mac’s HomePossible Program. You can qualify for a 97 LTV loan even if you have no credit history. This program offers many of the same benefits as the HomeReady options such as low interest rates, low down payments, PMI cancelation, and flexibility in covering closing costs. However, loan structures are different.

The HomePossible 97 LTV loan requires only a 3% down payment. You can take one out on a 15- or 30-year fixed-rate term. Or you can apply for one of various adjustable-rate mortgages (ARMs). Income limits are also set each year by location.

NADL

Pros – Very generous credit score requirements
Cons – Funding fee tends to be lower than that of a traditional VA loan
Eligibility – Home must be on Federal Trust land and other areas designated by the VA. Eligible veterans and current service members also must be one of the following.
Best For – Native American service members, veterans and other eligible applicants with low-to-moderate income

The VA also sponsors the Native American Direct Loan Program (NADL). Despite its name however, other groups who served or serve can qualify. This includes Native Hawaiian and Pacific Islanders. To qualify, the home you’re eyeing must also be on Federal Trust land.

These loans usually charge low interest rates. Plus, they require no down payment nor PMI. Closing costs will also be considerably low. The VA is typically generous when it comes to income and credit score requirements.

Oklahoma First-Time Homebuyer Programs

The Oklahoma Housing Finance Agency (OHFA)

Oklahoma first-time home buyer programs

Pros – Low down payments
– Some options specifically designed for police officers, firefighters and teachers
Cons – Income requirements can vary widely by location
Eligibility – Meet income requirements that vary by area. See OHFA-registered lender in your area for latest rates
Best For – First-time homebuyers with low-to-moderate income

The Oklahoma Housing Finance Agency (OHFA) helps individuals get fixed-rate mortgages with down payment assistance. The program works with local lenders to offer “Dream,” “Shield” and “4 Teachers” mortgages. The Shield option is meant for police officers and firefighters.

Dream and Shield loans come with up to a 3.5% down payment assistance gift. So no pay back is necessary. In addition, those that qualify for the Shield and the 4 Teachers program get a discount on daily published rates.

To qualify for any one of these programs, you’d need to earn no more than 115% of the average median income in the county you want to live in. You’d also need a credit score of at least 640.

In addition, those with a Freddie Mac Home Possible loan may get  $1,500 to $2,500 in closing cost through this program.

Tips for Finding Your Dream Home in Oklahoma

Oklahoma first-time home buyer programs

  • This report covers programs that apply to Oklahoma state. Local counties and cities may also offer benefits like down payment assistance programs.
  • House hunting can be a complicated task, especially when you factor in points like down payments and closing costs. To help you figure out the real cost, we developed our mortgage calculator.
  • Landing your dream home can be a complex process filled with paper work, research and number crunching. If you want some guidance, our SmartAsset matching tool can help. It asks you a few simple questions about your goals. Then, it links you with up to three local financial advisors who can best cater to your needs.

Photo credit: ©iStock.com/DenisTangneyJr, ©iStock.com/Davel5957, ©iStock.com/monkeybusinessimages

Javier Simon, CEPF® Javier Simon is a banking, investing and retirement expert for SmartAsset. The personal finance writer's work has been featured in Investopedia, PLANADVISER and iGrad. Javier is a member of the Society for Advancing Business Editing and Writing. He has a degree in journalism from SUNY Plattsburgh. Javier is passionate about helping others beyond their personal finances. He has volunteered and raised funds for charities including Fight Cancer Together, Children's Miracle Network Hospitals and the National Center for Missing and Exploited Children.
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