Stay Informed!

First-Time Homebuyer Assistance

Overview

Even in today’s challenging housing market, a home remains the primary asset for many American households. It is an integral part of the American dream and provides both physical and financial security. Yet low- and moderate-income families face a number of barriers to achieving homeownership. State support for first-time homebuyers can help overcome these challenges. States can offer competitively-priced mortgage lending products directly to homebuyers. They can also provide downpayment assistance to help lower-income borrowers who may not have a lump sum to put down on a home. States can also help families make a successful transition to homeownership by investing in homebuyer education and by providing other programs designed specifically to assist low-income renters who wish to become homeowners.

Policy Ratings

To see state-by-state policy data, click here.

Elements of a Strong Policy

Based on the expertise of the National Council of State Housing Agencies, CFED considers a state’s first-time homeownership policy strong if it meets the following criteria:

1. Does the state offer direct lending programs to first-time homebuyers? By offering loans directly to borrowers, states can play a pivotal role in assisting first-time homebuyers in securing mortgage credit at fair rates and terms, which is particularly important in the current credit market.
2. Does the state offer grants or loans for downpayment assistance? Homeownership is often out of reach for low- and moderate-income households because they lack the necessary, often substantial, downpayment. Direct grants and “soft second” mortgages (which are subsidized and/or forgivable loans to help boost a borrower’s equity) can bridge the financing gap for first-time homebuyers.
3. Does the state provide funding for homeownership counseling? Educating first-time homebuyers on the purchase process and helping them make informed decisions about their housing investment is one important way to ensure a successful transaction and decrease the likelihood of foreclosure. Homeownership counseling is correlated with lower mortgage payment default rates, and has a significant impact on first-time and low- and moderate-income homebuyers. States should fund homeownership education and counseling for prospective homebuyers and current homeowners.
4. Does the state offer programs specifically designed to help transition low-income renters to homeownership? Section 8 housing vouchers, traditionally used to subsidize rental housing for low-income families, can also be used for first-time homeownership if a state permits. States should take advantage of this option. States can also implement lease purchase programs, which allow low-income families with poor credit histories to access financing and purchase homes once they have made on-time rent payments for a set period of time. Both of these programs help low-income renters enter the housing market and acquire an appreciating asset.