Fewer homes for sale and sky high home prices have made homebuying a major challenge in recent years, especially for first-time buyers. Prior to 2020, it could take several months to sell a home, but today the typical home stays on the market for just 19 days. Competition is fierce, with many homes selling above list price, and many buyers being outbid on multiple homes.
If you are looking to purchase your first home, you may wonder if it is even possible to do so in today’s market. Here are some tips and loan program considerations to hopefully help you do just that:
First-Generation Home Buyers in Rhode Island May Be Eligible for Down Payment Assistance
Rhode Island currently has one of the lowest rates of home ownership among all states, largely due to buyers not being able to afford a down payment. In response to this, Rhode Island Governor Dan McKee announced the launch of a pilot program called FirstGenHomeRI in February 2022. The program provides up to $25,000 in down payment assistance for home buyers who meet program eligibility; namely, people who are the first in their family to purchase a home. Qualified buyers can obtain a zero-interest loan for their down payment, that the state will forgive after the borrower lives in the home for five years and makes it their primary residence. No monthly payments are due on the loan.
Although the pilot program is currently available in only a few select communities, Governor McKee hopes to make it a statewide program by 2023. You may be eligible to apply for down payment assistance in 2022 if you are the first in your family to purchase a home and are looking to buy in an eligible area. Eligible communities include:
Consider Applying for an FHA Loan
Loans backed by the Federal Housing Administration (FHA) have more lenient credit history requirements than conventional home loans, and allow for down payments as low as 3.5% of the purchase price. They are designed to help people who may not qualify for a traditional mortgage. FHA loans typically also offer lower interest rates and reduced closing costs than traditional mortgage products.
An FHA loan can be a great tool for helping first-time home buyers afford a down payment, but it’s worth noting that they do typically have lower loan amount limits than conventional loans. They also require mortgage insurance.
MA and RI Mortgage Programs
Both Massachusetts and Rhode Island operate mortgage programs at the state level that provide low-down payment and no-down payment options along with down payment assistance. The programs in both states have more lenient credit history requirements than traditional home loans as well.
Through MassHousing you may be eligible to receive a grant for up to 5% of your down payment or a maximum of $25,000 when buying a home in Boston or a specified “Gateway City”, which include Attleboro, Brockton, Fall River, New Bedford, Taunton, and others. Massachusetts also offers down payment assistance of up to five percent or $15,000 for people buying a home in other MA communities.
RI Housing offers a variety of homeowner programs, including 100% financing with no down payment for first-time home buyers, closing cost and down payment assistance, and first-time homeowner tax credits.
MassHousing loans and Rhode Island Housing loans are offered through partnerships with financial institutions such as BankFive.
Consider a Condo
A condominium is typically a unit that includes at least one shared wall with a neighbor. A condo is similar to an apartment, but you buy it instead of rent it. Stand-alone condos – ones that do not share a wall with an adjoining unit - are becoming more popular as well.
When you buy a condo, you own the property itself but not the land around it. The condo association owns the land, which is a common area shared by the condo owners. Common areas can include things like yards, swimming pools, parking lots, or fitness centers. Condo owners pay for upkeep of common areas through their homeowner’s association dues.
Condos can be more affordable than single-family homes, and can potentially require less upkeep than a home since you’re not responsible for things like mowing the lawn or shoveling the driveway. Some condos also provide access to more amenities than you would get with a house. Many condos have more robust security than stand-alone homes, which can make them cheaper to insure as well.
Some possible drawbacks to consider include less privacy, rules imposed by the condo association, and assessment fees. It’s also worth noting that you could potentially have a more challenging time selling a condo than a private home, simply because this type of living arrangement is not for everyone.
Remember the Benefit of Building Equity
If you have been putting off buying a home until home prices or mortgage rates come down, keep in mind that you could be losing several years of building equity while waiting for a market change that may never come. Buying a home is almost always a good investment, so long as you purchase something you can truly afford.
The main idea is that your home will increase in value over time due to market trends, improvements and renovations, land appreciation, neighborhood development and more. Because of this, you are essentially making money with home ownership because you will typically profit when you decide to sell. Property investment is one of the most straightforward ways to build wealth, while also providing you with a place to live.
It’s also worth noting that if mortgage rates fall significantly after you purchase a home, you can always refinance to a lower-rate mortgage down the road.
It is understandable to feel overwhelmed when buying a house for the first time. There are many programs and loan options available, but you may need some guidance. If you are considering a home purchase or just want to know where to start, schedule a meeting with a member of BankFive’s dedicated Home Lending Team.
If you are looking to purchase your first home, you may wonder if it is even possible to do so in today’s market. Here are some tips and loan program considerations to hopefully help you do just that:
First-Generation Home Buyers in Rhode Island May Be Eligible for Down Payment Assistance
Rhode Island currently has one of the lowest rates of home ownership among all states, largely due to buyers not being able to afford a down payment. In response to this, Rhode Island Governor Dan McKee announced the launch of a pilot program called FirstGenHomeRI in February 2022. The program provides up to $25,000 in down payment assistance for home buyers who meet program eligibility; namely, people who are the first in their family to purchase a home. Qualified buyers can obtain a zero-interest loan for their down payment, that the state will forgive after the borrower lives in the home for five years and makes it their primary residence. No monthly payments are due on the loan.
Although the pilot program is currently available in only a few select communities, Governor McKee hopes to make it a statewide program by 2023. You may be eligible to apply for down payment assistance in 2022 if you are the first in your family to purchase a home and are looking to buy in an eligible area. Eligible communities include:
- Central Falls
- East Providence
- Select parts of Newport (the census tract on the North Side)
- Pawtucket
- Providence (excluding the East Side)
- Woonsocket
Consider Applying for an FHA Loan
Loans backed by the Federal Housing Administration (FHA) have more lenient credit history requirements than conventional home loans, and allow for down payments as low as 3.5% of the purchase price. They are designed to help people who may not qualify for a traditional mortgage. FHA loans typically also offer lower interest rates and reduced closing costs than traditional mortgage products.
An FHA loan can be a great tool for helping first-time home buyers afford a down payment, but it’s worth noting that they do typically have lower loan amount limits than conventional loans. They also require mortgage insurance.
MA and RI Mortgage Programs
Both Massachusetts and Rhode Island operate mortgage programs at the state level that provide low-down payment and no-down payment options along with down payment assistance. The programs in both states have more lenient credit history requirements than traditional home loans as well.
Through MassHousing you may be eligible to receive a grant for up to 5% of your down payment or a maximum of $25,000 when buying a home in Boston or a specified “Gateway City”, which include Attleboro, Brockton, Fall River, New Bedford, Taunton, and others. Massachusetts also offers down payment assistance of up to five percent or $15,000 for people buying a home in other MA communities.
RI Housing offers a variety of homeowner programs, including 100% financing with no down payment for first-time home buyers, closing cost and down payment assistance, and first-time homeowner tax credits.
MassHousing loans and Rhode Island Housing loans are offered through partnerships with financial institutions such as BankFive.
Consider a Condo
A condominium is typically a unit that includes at least one shared wall with a neighbor. A condo is similar to an apartment, but you buy it instead of rent it. Stand-alone condos – ones that do not share a wall with an adjoining unit - are becoming more popular as well.
When you buy a condo, you own the property itself but not the land around it. The condo association owns the land, which is a common area shared by the condo owners. Common areas can include things like yards, swimming pools, parking lots, or fitness centers. Condo owners pay for upkeep of common areas through their homeowner’s association dues.
Condos can be more affordable than single-family homes, and can potentially require less upkeep than a home since you’re not responsible for things like mowing the lawn or shoveling the driveway. Some condos also provide access to more amenities than you would get with a house. Many condos have more robust security than stand-alone homes, which can make them cheaper to insure as well.
Some possible drawbacks to consider include less privacy, rules imposed by the condo association, and assessment fees. It’s also worth noting that you could potentially have a more challenging time selling a condo than a private home, simply because this type of living arrangement is not for everyone.
Remember the Benefit of Building Equity
If you have been putting off buying a home until home prices or mortgage rates come down, keep in mind that you could be losing several years of building equity while waiting for a market change that may never come. Buying a home is almost always a good investment, so long as you purchase something you can truly afford.
The main idea is that your home will increase in value over time due to market trends, improvements and renovations, land appreciation, neighborhood development and more. Because of this, you are essentially making money with home ownership because you will typically profit when you decide to sell. Property investment is one of the most straightforward ways to build wealth, while also providing you with a place to live.
It’s also worth noting that if mortgage rates fall significantly after you purchase a home, you can always refinance to a lower-rate mortgage down the road.
It is understandable to feel overwhelmed when buying a house for the first time. There are many programs and loan options available, but you may need some guidance. If you are considering a home purchase or just want to know where to start, schedule a meeting with a member of BankFive’s dedicated Home Lending Team.