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utah first-time home buyer programs

Both the federal government and Utah Housing Corporation sponsor first-time homebuyer programs and down payment assistance to help Beehive State settlers achieve homeownership. Some cater to low-income individuals with less-than-ideal credit scores. Others are designed specifically for public service professionals like teachers, police officers and firefighters.

If you want some help during the homebuying process, consider finding a financial advisor in your area who can help you manage the costs of homeownership.

Federal First-Time Homebuyer Programs

Before we discuss the programs only available to Utah residents, we’ll first touch on a handful of federal homebuyer programs that residents of every state can apply for. Make sure to consider both national and state programs when conducting your mortgage search.

FHA Loans

Pros – Low down payment required
– Don’t need a high credit score
Cons – Larger down payment needed for those with a credit score below 580
Eligibility – Credit score of at least 500
– At least 3.5% down payment
Best For – Anyone that doesn’t have great credit history or enough money for a down payment

The Federal Housing Administration backs FHA loans, which are a great option for borrowers that lack the upfront funds needed to purchase a home. Rather than the typical 20% down payment, FHA loans only require you to provide 3.5% of your home’s value at the time of purchase.

However, to receive this perk in its full glory, you must have a FICO® credit score of 580 or above. If yours is lower, you’ll need to make closer to a 10% down payment. At half the size of a typical mortgage down payment, that still makes homeownership considerably more attainable. In fact, even with the credit score requirement, an FHA loan is one of the easiest federal programs to qualify for.

VA Loans

Pros – Up to 100% loan coverage
– No private mortgage insurance required
– Usually come with lower closing costs than conventional loans
Cons – Must pay a VA funding fee
– Long application process
Eligibility – For current or former military members, spouses, or other beneficiaries
– Credit score of at least 620
Best For – Veterans without the income or savings to cover a typical down payment

The Department of Veterans Affairs insures VA loans, which help veterans without adequate income or savings to afford a typical 20% down payment. VA loans offer a unique benefit: They allow you to get a mortgage with no down payment at all.

Plus, since the government is insuring the loan, you won’t have to get private mortgage insurance (PMI), which is usually obligatory if you’re putting down less than 20%. Closing costs are also usually lower than they are with conventional and other mortgages.

In most situations, you need a FICO® credit score of at least 620 to get a VA loan. You also need to pay a VA fee, which ranges anywhere from 1.25% to 2.4% of your home’s value depending on whether or not you pay a down payment.

USDA Loans

Pros – No down payment required
– Can be approved even with a low credit score
Cons – Not available if you can qualify for a conventional mortgage
Eligibility -Adjusted household income must be within 115% of the area median income
– Home must be in an eligible rural area
Best For – Low- to mid-income borrowers willing to live in the country

Legally known as a “Section 502 Single Family Housing Guaranteed Loan Program,” the United States Department of Agriculture (USDA) backs USDA mortgages to attract new homebuyers to rural and semi-rural places throughout the country. In most cases, you won’t even have to pay any down payment.

If your credit score falls a bit lower on the FICO® spectrum, you may have to pay a down payment of roughly 10%, which is still a considerable discount from the typical 20%. Keep in mind that you must earn less than 115% of the U.S. median income and have been denied a conventional loan to qualify.

Good Neighbor Next Door Program

Pros – 50% lowered home cost
– Ability to sell the home and retain all equity after three years
Cons – Not available in most areas
– Not available to most people
Eligibility – For firefighters, police officers, emergency medical technicians or teachers
– Must remain in the home for at least three years after purchase
Best For – Teachers and public servants without enough savings to buy a home

The Good Neighbor Next Door Program is one of the more unique federal mortgage offerings on the market. Only emergency personnel and pre-K through 12th-grade teachers can apply. Though not really a loan, it offers a flat 50% discount on the home’s value. Participants are encouraged to get a conventional, VA or FHA mortgage to pay for the home, but they can also pay cash.

In order to save half off your home, it must be located within a “revitalization area” as titled by the Department of Housing and Urban Development (HUD). You must also agree to make the home your primary residence for at least three years. So long as you meet these terms, you can sell the home and hold onto any equity and profit once the three years are up.

Fannie Mae/Freddie Mac

Pros – Low down payment required
– Don’t need any credit history in some instances
– Various loan styles available
Cons – May carry higher interest rates than other federal programs
Eligibility – Income requirements dependent on the home’s location
Best For – Anyone who doesn’t qualify for other federal programs, but needs a discount on the upfront costs of homeownership

Freddie Mac and Fannie Mae are government-sponsored mortgage lenders. While technically two different entities, they offer very similar programs suitable for anyone buying their first home.

Home Possible® mortgages from Freddie Mac have a required minimum down payment of 3%. These loans can be for 15 or 30 years and can carry 5/5, 5/1, 7/1, or 10/1 adjustable-rate terms. The standard option is available even to those without a credit history.

The HomeReady® loan from Fannie Mae, on the other hand, requires down payments as low as 3%. Borrowers need a FICO® credit score of 620 or above for this one. They also must make an income at or near the U.S. median. With both Home Possible® and HomeReady® loans, you must have private mortgage insurance at the time of purchase, though you can cancel it once you’ve accrued 20% equity in your new home.

NADL

Pros – No down payment required
– Can be approved with a very low credit score
– No private mortgage insurance required
– Usually come with lower closing costs than conventional loans
Cons – Not available in all areas
– Not available to most people
Eligibility – For current or former military members of Native American descent, their spouses, or other beneficiaries
– Only for homes located on allotted lands, Alaska Native corporations, Pacific Island territories, or federally-recognized trusts
Best For – Native American veterans that can’t afford a typical down payment

A Native American Direct Loan (NADL) is another mortgage program backed by the Department of Veteran Affairs. It comes with impressive perks, like 0% down payment and a set interest rate. The interest rate currently sits at 4.5%, though that is subject to change based on market and Prime Rate fluctuations.

Don’t worry if you have a poor credit record. NADLs have very low credit requirements. They also eliminate the need for private mortgage insurance, a benefit that extends from normal VA loans. In an effort to cut down on the extra expense that closing costs can create, the VA has significantly lowered those as well.

Utah First-Time Homebuyer Programs

utah first-time home buyer programs

In addition to the programs offered by the federal government, the state of Utah offers some programs intended to help residents afford their first home.

FirstHome

Pros – Low down payment required
– Competitive interest rates
– A second loan for up to 6% of the original loan value
Cons – Second loan has higher interest rates
Eligibility – Credit score of at least 660
– Income and purchase price limits dependent on home location
Best For – Anyone with limited income and a decent credit score who can’t afford a typical down payment

FirstHome mortgages from the Utah Housing Corporation (UHC) have the lowest interest rates of any UHC program. Borrowers can apply through one in a statewide network of participating lenders. In addition to the low rates, FirstHome participants can apply for a second loan up to 6% of the primary mortgage amount to help cover the down payment, closing costs or both.

FirstHome loans can even be used for manufactured homes, under certain conditions. To qualify, borrowers must have a decent credit score (660 on the FICO® scale). Keep in mind there are also income and purchase price limits to consider.

HomeAgain

Pros – Low down payment required
– A second loan for up to 6% of the original loan value
Cons – Higher interest rates and stricter income limits than the FirstHome program
– Second loan has even higher interest rates
Eligibility – Credit score of at least 660
– Income must be $96,600 or less
Best For – Anyone with limited income and a decent credit score who doesn’t qualify for the FirstHome program

The HomeAgain Loan is very similar to the FirstHome program, but it comes with slightly higher interest rates and stricter income limits. Still, the credit score requirements and down payment assistance are exactly the same. The HomeAgain loan isn’t restricted to first-time homebuyers.

Applicants need a FICO® score of at least 660 and may apply for a second mortgage for up to 6% of the primary mortgage amount. These funds can help cover the upfront costs of homeownership, like a down payment and closing costs. HomeAgain second mortgages have interest rates two percentage points higher than those on the primary mortgage.

UHC NoMI Loan

Pros – Very low down payment required
– No mortgage insurance required
– A second loan for up to 5% of the original loan value
Cons – Higher interest rates than with the FirstHome and HomeAgain programs
– Second loan has higher interest rates
Eligibility – Credit score of at least 700
– Must complete a homebuyer education course
– Income must be $96,600 or less
Best For – Utah homebuyers with a good credit score that can’t afford the upfront costs of homeownership on their own

NoMI Loans don’t carry interest rates as low as, or come with down payment assistance as high as, the FirstHome or HomeAgain mortgage programs. On the bright side, you only need a down payment of 3% with a NoMI loan. Perhaps best of all, you won’t need to pay for costly private mortgage insurance (PMI).

NoMI loans also come with down payment and closing cost assistance, though this is for only up to 5% of the primary mortgage amount. To qualify, you will need a solid FICO® score of no less than 700. NoMI borrowers also need to take between four and eight hours of homebuyer education classes from Finally Home, Freddie Mac or the Department of Housing and Urban Development. Some of these classes are free and others cost around $35.

Utah Housing Score Loan

Pros – Don’t need a high credit score
– Low down payment required
– A second loan for up to 4% of the original loan value
Cons – Higher interest rates than with the UHC NoMI program
– Second loan has even higher interest rates
Eligibility – Credit score of at least 620
– Must earn less than $78,500
– Must complete a homebuyer education course
Best For – Low- to moderate-income borrowers with a lower credit score that can’t afford a typical down payment

Score Loans are mortgages for mid- to low-income people that have a credit score below the 660 minimum required by other UHC mortgages. Income and price limits are low, meaning it’s for less affluent first-time homebuyers. You still need to be able to meet the requirements of an FHA-backed mortgage to qualify for this program.

A down payment and closing cost loan is available, but only for up to 4% of the primary mortgage amount. As with NoMI loans, Score participants must complete a homebuyer education course within 90 days of closing.

Grants for Veterans

Pros – Up to $2,500 to help cover the costs of homeownership
Cons – Not available to most people
Eligibility – For members of the military or recent veterans
– Must be eligible for a VA Home Loan Certificate of Eligibility
– Available even to those that owned homes in other states
Best For – Military members and recent veterans without sufficient savings

Your original mortgage can be VA, FHA, Fannie Mae or Freddie Mac. Either way, participants receive up to $2,500 after purchasing the home. Even though grants are available to people who have previously owned homes in other states, the applicant pool is very limited.

Tips to Navigate the Mortgage Market

utah first-time home buyer programs

  • It’s best to figure out how much house you can afford before you start looking for your first home. The last thing you want is to bite off more than you can chew.
  • Keep in mind that buying a home means paying moving and closing costs in addition to the down payment. Along the same lines, homeownership is more than just monthly mortgage payments. Make sure you factor in homeowners insurance, property taxes, and maintenance costs.
  • Buying your first home in Utah will undoubtedly impact your financial situation in a big way. A professional can show you how to handle the transition into homeownership while keeping other financial goals in sight. If you don’t have an advisor, you can use SmartAsset financial advisor matching tool to find one in your area.

Photo credit: ©iStock.com/AlexRaths, ©iStock.com/monkeybusinessimages, ©iStock.com/fstop123

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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