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First-Time Home Buyer Programs in Montana for 2024


montana first-time home buyer programs

The federal government and the state of Montana run several programs for first-time homebuyers in Big Sky Country.

Depending on your exact needs and circumstances, there are multiple types of loans that you have access to. Some loans require a cheap down payment and low credit score minimums. Some loans target specific demographics such as veterans and school teachers. In addition, a financial advisor can help you find the best Montana first-time homebuyer programs for you. An advisor is a professional who can examine your situation and goals to help you make informed financial decisions. Finding an advisor doesn’t have to be a challenge. SmartAsset’s free tool can help you connect with advisors who serve your area.

Federal First-Time Homebuyer Programs

FHA Loans

Pros– As little as a 3.5% down payment
– Can be used to purchase a home with up to four units
Cons– A larger down payment is necessary if credit score is below 580
– Mortgage insurance may be required
Eligibility– Must be used to purchase your primary residence
– Credit score must be 500 or above
Best For– Those who don’t have a great credit history
– Those who don’t have enough to make a large down payment

Lenders throughout Montana offer FHA Loans as part of their mortgage portfolio. The Federal Housing Administration backs these loans and they offer low down payments. You can expect a down payment of just 3.5% when you get one of these loans. For reference, a conventional mortgage may require a down payment as high as 20% and a higher credit score.

The 3.5% down payment only applies to applicants who have a FICO® credit score of 580 or higher. If your score is below that threshold, the FHA will require you to make a 10% down payment. Even that down payment still beats most mortgages in Montana.

VA Loans

Pros– Cover up to 100% your home’s value
– Usually come with lower closing costs than conventional loans
– No private mortgage insurance
Cons– The application process can be drawn out
– Must pay a VA funding fee
Eligibility– Current or former military member, a member’s spouse or another eligible beneficiary
– Credit score of 620 or higher
Best For– Veterans with little monthly income and savings for a comfortable down payment

Veterans, current members of the U.S. military, their spouses and other eligible beneficiaries can apply for VA loans. The Department of Veterans Affairs backs these low-interest mortgages. These options may suit eligible first-time homebuyers who lack the capital for a normal down payment but have the monthly income to take on a mortgage. So as long as your new home’s value falls within the standards of a VA loan, the loan could cover as much as 100% of the price.

As great as this sounds, VA loans do come with a VA funding fee that can range anywhere from 1.25% to 3.3%. Even if you think about this as a substitute down payment, it’s still less than the vast majority of other options. You also need a minimum FICO® credit score of about 620 for approval.

Any mortgage will come with closing costs, but the VA lowers these beneath what most other options charge. Also, because the VA backs these loans, buyers won’t have to get private mortgage insurance to cover themselves in case of a default.

USDA Loans

Pros– Available to people in rural areas with little monthly income or without enough savings for a comfortable down payment
Cons– If you qualify for a conventional mortgage, you can’t get one
Eligibility– Cannot make more than 115% of the adjusted household median income for the area in most cases
– Must purchase a home within an eligible rural area
Best For– Low- or mid-income Americans looking to live in a rural or suburban area

To get more Americans to buy homes in the countryside and in certain suburban areas, the federal government created USDA loans. The United States Department of Agriculture backs these mortgages and they apply to single-family homes that are within certain approved areas.

Similarly to VA loan, USDA loans do not come with minimum down payment requirements. This means you can finance up to 100% of your new home’s value. Should your FICO® credit score land too low, your down payment may be pushed to 10% of your home’s value, though.

The only factor that could hold you back from getting approved for a USDA loan is having too high of an income. So if your adjusted household income is above 115% of the area’s median income, you may have to go with a conventional mortgage or a different type of USDA loan.

Good Neighbor Next Door Program

Pros– Get a flat 50% discount on the value of your new home
– After three years, you can sell the home and keep all equity
Cons– Not available to most people and in most areas
– You have to live in the home for at least three years after purchase
Eligibility– Must be a police officer, firefighter, emergency medical technician or a pre-K to 12th grade teacher
Best For– Teachers or emergency personnel with little in savings

The Good Neighbor Next Door Program helps K-12 teachers and emergency personnel buy homes in areas around the U.S where these individuals are found less often. The federal government has identified various places as “revitalization areas.” So if you’re a police officer, firefighter, emergency medical technician or teacher, you can use this program to get a house in one of these areas for 50% off.

While this program is beneficial, you don’t physically obtain a mortgage through it. Instead, your discount applies through the program and you can pay cash or get a conventional, FHA or VA mortgage to cover the balance. You will, however, be required by law to keep this home as your primary residence for at least three years. After that, you can sell the home and keep the profits.

Fannie Mae/Freddie Mac

Pros– Very low down payment stipulations
– Little to no credit needed for approval
– Many loan styles available
Cons– Could come with higher interest rates
Eligibility– In some cases, no income requirements in underserved areas
Best For– Anyone who is looking for a low down payment loan option, but doesn’t qualify for any of the above options

The federal government created Freddie Mac and Fannie Mae to help build stability in the mortgage market, and each offers a loan program geared toward first-time homebuyers.

Fannie Mae’s HomeReady® mortgage requires a lower down payment than an FHA loan at 3%. On a $250,000 home, that would be a $7,500 down payment. However, you will need to have an income at or below the U.S. median to qualify. You will also need a credit score of at least 620. While you will be required to pay for private mortgage insurance, you can cancel it once you’ve accrued 20% equity in your home.

The Home Possible mortgages from Freddie Mac are very similar to Fannie Mae’s offering. There are just some minor differences to note. The Home Possible loan is available in 15- to 30-year fixed-rate terms, and also as a 5/1, 5/5, 7/1 or 10/1 adjustable-rate mortgage (ARM). But the Home Possible Advantage loan comes in just fixed-rate variations, with terms available from 15 to 30 years.

Native American Direct Loan (NADL)

Pros– Minimal credit score requirements
– No down payment and no private mortgage insurance
– Cheap closing costs
Cons– Limited group of eligible borrowers
– VA funding fee is required
Eligibility– Home must be on allotted lands, Alaska Native corporations, Pacific Island territories or federally recognized trusts
Best For– Native American veterans that lack money for a down payment

As an alternative to traditional VA loans, the Department of Veterans Affairs created the Native American Direct Loan (NADL) just for Native American veterans and their spouses or veterans married to a person of Native American descent. These mortgages feature a 0% down payment requirement and do not call for private mortgage insurance, as they’re backed by the VA. You’ll also receive lower closing costs than most mortgage alternatives. NADLs are extremely forgiving when it comes to credit score requirements for approval as well.

Unfortunately, you cannot use these loans to purchase, build or renovate just any home. The home has to be situated on allotted lands, Alaska Native corporations, Pacific Island territories or federally recognized trusts.

Montana First-Time Homebuyer Programs

Montana Board of Housing

montana first-time home buyer programs

The Montana Board of Housing (MBOH) offers several benefits aimed at low-to-moderate-income Montanans. These perks include down payment assistance programs, homebuyer educational material, loans and more. To qualify for these services, you generally must meet the following requirements:

  • You cannot have owned a home in the past three years (waived for eligible veterans or if the property is in a “target” area)
  • You must meet income limits that vary by county and household size
  • You must have an adequate credit history

In addition, the agency helps Montanans secure government-backed mortgages like FHA and VA loans. It also manages programs designed to help people with permanent disabilities. And if you don’t qualify, you may be eligible for a unique tax credit. Read on for more details.

Regular Bond Loan Program

Pros– Easy access to government-backed loans
Cons– Down payments may be higher for those with poor credit history
Eligibility– Meet income limits that vary by type of loan and other factors
– Meet additional criteria set by specific lenders
Best For– Low-to-moderate income Montanans

Through the Regular Bond Loan Program, Montana Housing purchases government-backed mortgages. These include FHA, VA, USDA and HUD loans. Eligible borrowers get a 30-year, fixed-rate loan service either from a local lender or directly through Montana Housing. Your down payment will depend on your credit score and other criteria.

To qualify, you must meet the following requirements:

  • Be a first-time homebuyer (waived for people buying property in target areas and for eligible U.S. military veterans)
  • Earn below household income limits, which vary by location
  • Occupy residence for life of loan

Bond Advantage Down Payment Assistance Program (DPA)

Pros– Helps you cover down payments and closing costs if you don’t have cash at hand
Cons– Income limits
– Not a grant
– Geographic restrictions
– Credit score requirements
Eligibility– Meet income requirements
– Have a minimum credit score of 620
Best For– Montanans who can make monthly payments on government-backed mortgages, but need some help covering down payments

Montana Housing designed the Bond Advantage Assistance Program (DPA) to help with government-backed mortgages like FHA and VA loans. Eligible borrowers may qualify for between $1,500 and $15,000 to cover down payments and closing costs. The loan amount cannot exceed 5% of the home’s purchase price.

It’s important to remember that this is not a grant. Think of it as a second mortgage with a term of 15 years. The interest rate depends on your credit score. Those with higher scores will get more favorable rates. The minimum credit score that you need to qualify is 620. You also need to meet income limits that vary by county.

To see if you’re eligible for a DPA loan, apply through a partnering lender.

NeighborWorks Montana (NWMT) Statewide Down Payment Assistance Second Mortgage Program

Pros– Applies to first-time homebuyers in the state
– Different types of loans available
Cons– Higher income could mean a higher interest rate
Eligibility– Meet income requirements
– Take NWMT-approved homebuyer education course
Best For– Low-to-moderate income Montanans who need help covering down payments and closing costs

NeighborWorks Montana (NWMT) provides down payment and closing cost assistance to homeowners throughout the state. This assistance comes in the form of loans issued by partnering lenders. You can either take out an amortizing loan or a deferred loan that you won’t need to pay back until you sell your home.

With an amortizing loan, you make monthly payments with interest to NWMT in addition to the monthly payment on your original mortgage. On the other hand, a 0% deferred loan allows you to steer clear of payments to NWMT until you refinance your mortgage or sell your home. The amortized loan amount can range from $2,500 to $40,000. Interest rates and term lengths depend on income.

To qualify for either type of loan, you must meet income limits, which vary by county and by other factors. You must also meet the following requirements:

  • Be a first-time homebuyer (unless you take out an amortizing mortgage)
  • Be a primary resident of the property for the duration of the loan
  • Complete NWMT-approved homebuyer education course

MBOH Plus 0% Deferred Down Payment Assistance Program

Pros– Applies to first-time homebuyers in the entire state
– Multiple types of loans available
Cons– Higher income could mean a higher interest rate
Eligibility– Meet income requirements
– Take NWMT-approved homebuyer education course
Best For– Low-to-moderate income Montanans who need help covering down payments and closing costs

This program serves as a complement to the Montana Housing Regular Bond Program. To help you cover down payments and closing costs, this program places a second mortgage lien of up to $15,000 on your property. To qualify, contact a participating lender.

The loan requires no monthly payments and generates no interest. However, you have to pay it in full upon transferring your property or refinancing your mortgage. To qualify, you must meet basic Montana Housing requirements, including income limits.

In addition, your credit score can’t sink below 620. And the back-end portion of your debt-to-income ratio can’t exceed 45%.

80% Combined Program

Pros– Low-interest loan
– Low down payments
– No PMI required
Cons– Interest rate could be high for those with poor credit history
Eligibility– Meet Regular Bond program requirements
Best For– Low-to-moderate income Montanans who need help covering down payments and closing costs

Montana Housing developed this program to eliminate the need for expensive private mortgage insurance (PMI), a common piece of the conventional mortgage puzzle. To make this possible, Montana Housing partners with non-profits. The result is that eligible borrowers can get a loan with a loan-to-value ratio of 80% or less, thereby eliminating the need for PMI. This first loan comes in the form of a 30-year, fixed-rate mortgage. It would be valued at 80% of the property’s purchase price. Your second mortgage would be worth 20% of the purchase price.

To qualify for this program, you must meet Basic Bond program requirements. You also have to meet criteria set by the participating non-profit. The NeighborWorks 20+ Community Second Program and the Human Resource Development Council currently fund the program’s second mortgages. The loans will be serviced either by a local lender or Montana Housing.

In addition, you’d need to take a homebuyer education course. You’d also need to make a cash investment worth 1% of the purchase price ($1,000 minimum).

Habitat for Humanity Loan

Pros– Access to newly constructed homes
Cons– Must meet certain credit requirements
Eligibility– Meet Basic Bond requirements and credit score stipulations
Best For– Low-to-moderate income Montanans

Montana Housing works with local Habitat for Humanity chapters to issue loans for families with qualifying credit histories. In addition, you have to meet Basic Bond requirements. You also have to stay within certain home value limits and household income limits that change by county.

To determine if you qualify, it’s best to contact Montana Housing directly.

Mortgage Credit Certificate Program

Pros– You can claim up to 20% of the mortgage interest that you pay on federal tax return
Cons– Not a grant or mortgage
Eligibility– Be a first-time homebuyer
– Meet income limits by county
Best For– Montanans trying to lower their federal income tax bills

If you’re paying a mortgage but don’t qualify for a program through Montana Housing, you may be eligible for a tax credit through the Mortgage Credit Certificate Program (MCC). Eligible borrowers can claim a tax deduction worth up to 20% of annual interest paid on their mortgages. And if you file an amended withholding statement with your employer, you could end up with more take-home pay.

You can carry this credit (which is non-refundable) over three years. However, it can’t exceed $2,000 for any given tax year. Additionally, 80% of any remaining mortgage interest can qualify as an itemized deduction.

To qualify, you must meet specific criteria set by individual lenders that partner with Montana Housing.

Tips for Finding the Right Home

montana first-time home buyer programs

  • As you look for mortgages, don’t forget that buying a house involves more costs than just your monthly mortgage payment. For example, there are down payments, closing costs and insurance. Luckily, our mortgage calculator factors in all the costs you need to consider.
  • No matter how much you like a house, make sure that you stay within your means. If you bite off more home than you can chew, you set yourself up for headaches and financial troubles down the road. So before you even start your search, remember you ask your how much house you can realistically afford.
  • The home-buying process isn’t always easy to navigate. This is especially true for first-time homebuyers who have yet to include a mortgage in their financial plan.  A financial advisor can help with this. 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.

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