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First-time home buyer programs in Wisconsin

Filled with pristine lakes, rivers and state parks, Wisconsin can be a wonderful place to lay down roots. And a first-time homebuyer program in Wisconsin can help you make it a reality. Wisconsin and the federal government sponsor various first-time homebuyer programs designed for all types of would-be home owners. So read on to learn all about the benefits available as well as their qualifications. And if you want professional guidance in exploring these programs, you can use our SmartAsset financial advisor matching tool. It links you to up to three financial advisors in your area who can help you house hunt like a pro. Plus, any one of these can direct you to the best first-time homebuyer programs in Wisconsin.

Federal First-Time Homebuyer Programs

FHA Loans

Pros – You can secure a 3.5% down payment with a credit score of at least 580
– Backed by the federal government, so lenders impose less strict requirements than they would for conventional mortgages
Cons – Those with credit scores between 500 and 580 can face higher rates and down payments
Eligibility – Credit score of at least 500
Best For –  First-time homebuyers with low-to-moderate income and adequate credit scores

The FHA loan program stands as one of the most popular first-time homebuyer programs in Wisconsin. So, what is an FHA loan? The Federal Housing Administration (FHA) backs these loans. But local lenders throughout Wisconsin issue them. The arrangement makes lenders more comfortable giving generous loans to people without the best income or credit. So a FICO® credit score as low as 580 can help you qualify for an FHA loan with a 3.5% down payment.

However, FHA loan qualification isn’t out of the question if your FICO® credit score falls below that level. But you may face higher interest rates and a smaller pool of lenders to work with. Still, your rates will likely fall below those linked to conventional mortgages.

USDA Loans

Pros – Low interest loans with no down payments available to those who qualify
– Credit score as low as 620 usually secures you the best rates
Cons – You can’t make more than 115% of the median income in the designated area you want to live in
Eligibility – Consider a single-family home in a USDA designated area, and not make more than 115% of the median income for that zone
Best For – low-to-moderate income homebuyers who want to live in parts of rural or suburban Wisconsin

Wisconsin encloses miles upon miles of pristine rural communities. And you can live there with the help of a low-interest USDA loan and a zero down payment. The United States Department of Agriculture backs these loans in order to help low- to moderate-income individuals move to designated rural areas. Still, many suburban locations near metropolitan hotspots fall under the USDA’s scope as well. Dozens of counties in Wisconsin fall under the USDA designated rural zone.

You can use a USDA loan to purchase a single-family home for primary residency in these locales. To qualify, however, you can’t make more than 115% of the median income in the zone you wish to live in.

And although USDA loans are backed by the federal government, most are issued through local lenders. This means lenders are less strict when it comes to qualification requirements. In fact, a FICO® credit score of 620 should help you secure a reasonable interest rate with no down payment. But because of these generous rates, you’d have to pay insurance premiums. These usually break down into a 1% to 2% upfront charge followed by 0.35% to 40% fees throughout the year. As with any mortgage, you’d also pay closing costs. But these typically stretch from 1% to 2% of the loan amount. These rates dip far below those reflected by conventional mortgages.

So if you hear the countryside calling, this is one of the first-time homebuyer programs in Wisconsin that you must check off your list.

VA Loans

Pros – Lower interest rates than conventional loans
– Zero down payment loans available for those who qualify
– No PMI requirement
Cons – VA funding fee
– Long appraisal process
Eligibility – Most veterans and current service members qualify
Best For – Veterans or current service members who have satisfactory credit and low-to-moderate income

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 Wisconsin 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 – Flat 50% discount off the listing price of a home in a revitalization area
– Allowed to sell home after three years
Cons – Competitive selection process
– You must live in your home as primary residence for at least three years
Eligibility – Qualification open to K-12 teachers, EMTs, police officers and firefighters
Best For – Eligible public servants with low-to-moderate income

Every community owes a debt of gratitude to the teachers, police, firefighters and emergency medical technicians (EMTs) that serve them. Unfortunately, some neighborhoods lack these professionals as permanent residents. To turn this around, the U.S. Department of Housing and Urban Development (HUD) sponsors the Good Neighbor Next Door Program.

It provides first-time homebuyers in Wisconsin with a 50% discount off the listing price of a home in a “revitalization” area. Wisconsin houses a few of these zones.

To qualify, you must undergo a preapproval process through a Good Neighbor Next Door agent. This individual helps you find listings. However, securing a listed home in the program is quite competitive. In some areas, homes are only listed for a few days. And selection is granted via a random lottery. But the Good Neighbor Next Door program claims your agent will help you find a listing in case you don’t get a bid. But if you do score the discount, you have to stay in your home as the primary resident for at least three years. Afterwards, you can sell it.

Keep in mind this is not a mortgage. It is a discount. You can cover the remaining balance with a USDA, VA, FHA loan or any other mortgage you qualify for.

Fannie Mae/Freddie Mac

Pros – Several options including some that don’t require a credit history
– Flexible repayment terms
– Cancellable PMI
– Closing costs can be covered from multiple sources
Cons – Some options require moderate credit scores
Eligibility – Income limits for homes in some areas, but this requirement is waived for property in targeted areas
Best For – Low-to-moderate income individuals who can’t secure a mortgage elsewhere

Those who can’t secure a mortgage elsewhere may find some solace through Fannie Mae or Freddie Mac. Established by the federal government, these entities aim to make home ownership a reality for low-income individuals. So if income and poor credit hinders you from securing a mortgage, Fannie Mae and Freddie Mac rest among the first-time homebuyer programs in Wisconsin you need to explore.

The HomePossible program through Freddie Mac requires no credit history. Freddie Mac works with local lenders to issue low-interest loans with a 3% to 5% down payment. You also have have to take out mortgage insurance. However, you can cancel it after your loan balance falls below 80% of its appraised value. And unlike with most mortgages, you can cover down payments with money from family or from employer-assistance programs.

One of Freddie Mac’s most popular options is the 97 LTV loan with a 3% down payment. You can also take out 15-to-30-year fixed rate mortgage. Or you can take out various adjustable-rate mortgages (ARMs).

Qualification depends on income limitations, which vary by location. However, lenders waive these limits if you use a loan to purchase property in “underserved” areas.

Fannie Mae offers similar loans through its HomeReady Program. However, you’d need a FICO® credit score of at least 620 to secure a loan with a down payment as low as 3%. You can also get the best rates if your FICO® credit score floats above 680.

NADL

Pros – Low closing costs and credit score requirements
– Small funding fee
Cons – Limited to a small group of borrowers
Eligibility – You must be a service member or veteran who also is one of the following: a Native American enrolled in an American Indian tribe or Alaskan Native village, or a tribe that holds an MOU with the VA; a Pacific Islander or Native Hawaiian; or the spouse of an eligible person.
Best For – Native American service members and veterans with low to moderate income

If you’re a Native American who’s served the United States Military, the VA can also help you finance a home. The Native American Direct Loan Program (NADAL) sponsors mortgages with low interest rates and very generous credit history requirements.

However, they must finance a home on Federal Trust Land, Alaska Native Corporation and other niche locations designated by the VA.

As with traditional VA loan requirements, you can take out one of these loans with a zero down payment. The VA also requires no PMI.

Wisconsin First-Time Homebuyer Programs

Wisconsin Housing and Economic Development Authority (WHEDA)

First-time home buyer programs in Wisconsin

Pros – Low-interest mortgages
– Down payment assistance
Cons – Need good credit
– Strict income limits
Eligibility – Meet income, house size and credit requirements set by lenders
Best For – Wisconsin residents with little-to-moderate income

The Wisconsin Housing and Economic Development Authority (WHEDA) functions as a state housing finance entity. It works with private lenders throughout Wisconsin to provide mortgages with below-average Wisconsin mortgage rates.

The agency also manages down payment assistance programs and an online first-time homebuyer education course. In fact, this course is required to qualify for a loan. It aims to arm you with all the knowledge you’ll need to be a prepared first-time homebuyer. You’ll also need to meet some income limits and other requirements depending on the type of WHEDA loan you’re considering.

Once you take this course, you can find a WHEDA-registered lender who can offer you different mortgage options.

One of them is the First-Time Home Buyer Advantage (FTHB) home loan. These low-interest loans cater to first-time homebuyers, veterans and those eyeing homes in federally designated target areas.

To qualify, you must meet the following requirements:

  • Have a good FICO® credit score (Most loans require a score of at least 620)
  • Meet income limits (Varies by county)
  • Property must be your primary residence
  • Purchase single-family home (Duplex requires landlord counseling)

WHEDA also offers an FHA Advantage loan with less strict requirements. You don’t even need to be a first time homebuyer in Wisconsin. However, you likely would need a minimum credit score of 620. You can use this 30-year-fixed-rate mortgage to purchase single-family homes.  However, you and other occupants must meet combined income limits which vary by county.

Furthermore, WHEDA offers the Veterans Affordable Loan Opportunity Rate (VALOR) loan. Available to eligible veterans, this 30-year-fixed-rate mortgage offers rates that fall below those tied to WHEDA Advantage loans. To be eligible for one, you must be a U.S. military veteran who has been honorably discharged or released. You must also meet all of the WHEDA Advantage loan requirements.

As you can see, requirements for WHEDA loans may be somewhat stricter than those of federally sponsored first-time homebuyer programs. However, the program itself offers additional benefits to those that qualify.

Tips for House Hunting in Wisconsin

First-time home buyer programs in Wisconsin

  • Keep looking. This review focused on federal and state-run programs. However, many local government agencies sponsor first-time homebuyer programs for their residents. So keep digging.
  • Use all available resources. Purchasing a home can be a complex task especially when you factor in all the numbers. There’s more to it than taking out a mortgage. You also have to consider down payments, closing costs and other factors. To help you do the math, we’ve developed our mortgage calculator. It helps you zero in on the real price of purchasing a home.
  • Work with a financial advisor. If you want professional guidance throughout the house hunting process, you can use our SmartAsset financial advisor matching tool. It asks you a few simple questions before linking you to qualified financial advisors based on your answers. These professionals can walk you through the process and help you find the mortgage that best works for you at rates you can afford.

Photo credit: ©iStock.com/sturti, Photo credit: ©iStock.com/FatCamera, ©iStock.com/csfotoimages

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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