Georgia First-Time Home Buying Assistance Programs & Grants for 2023

Georgia First-Time Home Buying Guide

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    By Walecia Konrad

    (Last Updated – 06/2022)

    Georgia, one of the fast-growing Southeastern states, continued to see its real estate prices rise in 2022.

    The median sales price in the Peach State was $364,400 in April 2022, indicating a 19% boost from the same time last year, according to real estate firm Redfin. The number of homes for sale fell 13.7% during the same period.

    Georgia still shows signs of a competitive market, with a 10% rise in the number of homes sold over list price compared with the same time last year. First-time buyers might not feel too optimistic about it all, but help awaits those who qualify.

    Who Is Considered a First-Time Homebuyer in Georgia?

    The definition of first-time homebuyer is broader than many people think.

    The Georgia Department of Community Affairs considers anyone who has not owned a home in the past three years a first-time homebuyer. That jibes with the federal government’s definition.

    In some targeted areas of the state, repeat buyers may also apply for first-time homebuyer programs. And typically veterans need not be first-time buyers.

    In certain targeted areas of the state , you do not have to be a first-time buyer to take advantage of the state programs.

    3 Georgia Programs for First-Time Homebuyers

    The Georgia Department of Community Affairs oversees a busy first-time homebuyer program. And several areas of Georgia, especially Atlanta, the state capital and largest city, offer extensive assistance for low- and moderate-income buyers.

    1. Georgia Dream

    The Georgia Dream homeownership program offers a 30-year fixed-rate conventional loan or government-backed FHA, USDA, or VA loan with competitive interest rates available to first-time buyers.

    Buyers must meet certain income and purchase price limits . Borrowers must also contribute at least $1,000 of their own funds toward the home purchase, but they may not have more than $20,000 or 20% of the home purchase price (whichever is greater) in liquid assets.

    A FICO® credit score of 640 or above is required. So is the completion of a homebuyer education course or counseling session, which can help buyers understand how much mortgage they can afford.

    2. Georgia Dream Down Payment Assistance

    The Georgia Dream mortgage loans can be paired with first-time homebuyer down payment assistance up to $7,500. This second loan is zero interest with no monthly payments. It’s due upon sale of the house or refinance of the first mortgage.

    Some people, including public servants such as protectors, educators or health care professionals, active-duty military members, and buyers with a family member who is disabled, may qualify for as much as $10,000 in down payment assistance.

    3. Local First-Time Homebuyer Assistance

    Atlanta, Macon, and Savannah all have active homeownership assistance programs. Invest Atlanta , for instance, offers several down payment assistance programs in several areas of the city.

    Be sure to check with the city, county, and local community and home advocate organizations for additional resources for first-time buyers.

    Recommended: Understanding the Different Types of Mortgage Loans

    How to Apply to Georgia Programs for First-Time Homebuyers

    The Georgia Department of Community Affairs website offers a complete description of the Georgia Dream program. It is not a lender but it does list participating lenders throughout the state. It also provides contact information for homebuyer education classes and counseling, which is required for all Georgia Dream applicants.

    Federal Programs for First-Time Homebuyers

    Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, like state programs, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.

    The mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.

    Federal Housing Administration (FHA) Loans

    The FHA, which is part of the U.S. Department of Housing and Urban Development (HUD), insures mortgages for borrowers with lower credit scores. Homebuyers choose from a list of approved lenders that participate in the program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers with FICO credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.

    Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.

    FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years. You can learn more about FHA loans in general and FHA lending limits by area.

    Freddie Mac Home Possible Mortgages

    Very low- and low-income borrowers may make a 3% down payment on a Home Possible® mortgage. These loans allow various sources for down payments, including co-borrowers, family gifts, employer assistance, secondary financing, and sweat equity.

    The Home Possible mortgage is for buyers who have a credit score of at least 660.

    Once you pay 20% of your loan, the Home Possible mortgage insurance will be canceled, which will lower your mortgage payments.

    Fannie Mae HomeReady Mortgages

    Fannie Mae HomeReady® Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; pricing may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.

    For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site .

    Fannie Mae Standard 97 LTV Loan

    The conventional 97 LTV loan is for first-time homebuyers of any income level who have a credit score of at least 620 and meet debt-to-income criteria. The 97% loan-to-value mortgage requires 3% down. Borrowers can get down payment and closing cost assistance from third-party sources.

    Department of Veterans Affairs (VA) Loans

    Active-duty members of the military, veterans, and eligible family members may apply for loans backed by the Department of Veterans Affairs. VA loans , to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment. Most borrowers pay a one-time funding fee that can be rolled into the mortgage.

    Native American Veteran Direct Loans (NADLs)

    Eligible Native American veterans and their spouses may use these no-down-payment loans to buy, improve, or build a home on federal trust land. Unlike VA loans listed above, the Department of Veterans Affairs is the mortgage lender on NADLs. The VA requires no mortgage insurance, but it does charge a funding fee.

    U.S. Department of Agriculture (USDA) Loans

    No down payment is required on these loans to moderate-income borrowers that are guaranteed by the USDA in specified rural areas. Borrowers pay an upfront guarantee fee and an annual fee that serves as mortgage insurance.

    The USDA also directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA site .

    HUD Good Neighbor Next Door Program

    This program helps police officers, firefighters, emergency medical technicians, and teachers qualify for mortgages in the areas they serve. Borrowers can receive 50% off a home in what HUD calls a “revitalization area.” They must live in the home for at least three years.

    Georgia First-Time Homebuyer Stats for 2022

    Here is a snapshot of the recent Georgia home buying experience.

    •  Median home sale price: $364,400

    •  3% down payment: $10,932

    •  20% down payment: $72,880

    •  Average credit score(vs. average U.S. score of 714): 693

    •  Georgia cost of living: Sixth lowest in the country

    Financing Tips for First-Time Homebuyers

    In addition to federal and state government-sponsored lending programs, there are other financial strategies that may help you become a homeowner. Some examples:

    •  Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.

    •  Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.

    •  401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.

    •  State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.

    •  The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.

    •  Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.

    •  Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.

    The Takeaway

    The Peach State has opportunities for low- and moderate-income first-time homebuyers through the Georgia Dream program. Other first-timers can look into local initiatives as well as government-backed and conventional loans.

    Make your dream of being a homeowner come true with SoFi’s competitive mortgage rates and down payments as low as 3% for qualifying first-time homebuyers.

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    Should I take first-time homebuyer classes?

    Yes! Good information is key to a successful home-buying experience for anyone, but especially for newcomers, who can easily be overwhelmed by the jargon, technicalities, and magnitude of applying for a mortgage and purchasing a home. First-time homebuyer classes can help. Indeed they are required for some government-sponsored loan programs.

    Do first-time homebuyers with bad credit qualify for homeownership assistance?

    Often they do. Many government and nonprofit homeowner assistance programs are available to people with low credit scores. And often, interest rates and other loan pricing are competitive with those of loans available to borrowers with higher credit scores. That said, almost any lending program has credit qualifications. That’s why it’s important to take all possible steps to improve your credit standing before you go house hunting.

    Is there a first-time homebuyer tax credit in Georgia?

    No, there is not a first-time homebuyer mortgage tax credit in Georgia. Like all homeowners, Georgia residents can take advantage of the federal tax deduction for mortgage interest paid.

    Is there a first-time veteran homebuyer assistance program in Georgia?

    The Georgia Dream Homeownership program includes enhanced down payment assistance for active military members. Georgia veterans may find options in the federal VA loan programs listed above.

    What credit score do I need for first-time homebuyer assistance in Georgia?

    Applicants for the Georgia Dream program must have a credit score of 640 or above.

    What is the average age of first-time homebuyers in Georgia?

    If Georgians are anything like their national peers, they’re 33 when buying a first home or a home again after three years.

    Photo credit: iStock/novikat

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