Idaho First-Time Home Buying Assistance Programs & Grants for 2022

Idaho First-Time Home Buying Guide

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    By Walecia Konrad

    (Last Updated – 06/2022)

    The Gem State’s relatively affordable and attractive housing has been luring both local first-time homebuyers and residents from nearby high-cost states like California for years, with activity peaking during the pandemic.

    March 2022 data shows a slight slowdown in home sales in the Idaho market, but still quite healthy home appreciation and demand. According to Redfin, a real estate brokerage that tracks nationwide housing market data, the number of homes sold that month declined almost 12% compared with the previous year.

    The decline of available properties for sale continues to fuel demand in Idaho. The number of homes for sale had dropped close to 40% year over year, and the number of newly listed homes had shrunk by 27%.

    Perhaps as a result of limited supply, the median home sale price had jumped 20.6% to $500,300 in March, Redfin reported.

    6 Idaho Programs for First-Time Homebuyers

    Let’s take a closer look at many of the first-time homebuyer programs available in Idaho, including those that welcome buyers with low incomes, limited down payments, and less-than-stellar credit scores.

    The Idaho Housing and Finance Association is a private mortgage lending institution that administers affordable housing resources in Idaho, including first-time and repeat buyer down payment assistance programs and conventional and government-insured mortgages for low-income homebuyers. Examples include:

    1. Freddie Mac HFA Advantage Loans

    Freddie Mac, the nickname of the Federal Home Loan Mortgage Corp., is a publicly traded company that is also a government-sponsored enterprise. It was designed to expand the secondary market in home mortgages. In partnership with a local housing finance agency (HFA), Freddie Mac offers conventional loans that require as little as a 3% down payment. Financial assistance based on income is also available. Freddie Mac works with Idaho Housing to provide access to the following loans:

    •  The HFA Advantage® 50% AMI is for residents with income under 50% of the area median income. It includes a grant of 1% of the loan to be used for closing costs or the down payment. With these loans, borrowers pay less in mortgage insurance than other options.

    •  HFA Advantage 80% AMI is for borrowers with income under 80% of the area median income, and the grant is 0.5% of the loan. Lower mortgage insurance premiums are available.

    Borrowers with income above 80% of the area median income can still get an HFA Advantage loan, but they will not receive a financial assistance grant.

    2. Fannie Mae HFA Preferred Loans

    Fannie Mae, or formally, the Federal National Mortgage Association, is also a publicly traded government-sponsored enterprise that dates back to the Great Depression. Fannie Mae, in partnership with HFAs or other organizations, offers an HFA Preferred™ 80% AMI for borrowers with income under 80% of the area median income, determined by location.

    Down payment assistance programs can be used with these conventional loans, and mortgage insurance often is lower than for standard loans.

    Fannie May HFA Preferred Over 80% AMI loans are for borrowers with income above 80% of the area median income.

    3. Idaho Housing First Loan

    These FHA, VA, or USDA loans are available for low-income homebuyers in specific counties. Income limits depend on the county, and some counties may also impose purchase price limits. Completing a homebuyer education course is mandatory for most Idaho Housing First Loan borrowers.

    4. Idaho Heroes Loan

    Teachers, firefighters, retail workers, health care professionals, law enforcement officers, military members, and veterans can qualify for the low-interest Idaho Heroes Loan, whether or not they are first-time buyers. Also available in the program: a second mortgage of up to 7% of the home purchase price to help with down payment and closing costs. (No minimum credit score is required for the second mortgage.)

    5. Idaho Down Payment Assistance Programs

    Two primary down payment assistance programs are offered by Idaho Housing that may help Idaho first-time homebuyers gather the initial funds needed for a home purchase.

    •  The Idaho Housing Second Mortgage is a fixed-rate 5% loan that is paid back monthly over 10 years and can be used to finance up to 5% of the purchase price. Borrowers must contribute at least 0.5% of the purchase price from their own funds toward the down payment. A credit score of 680 or above and completion of a homebuyer education course are required.

    •  The Idaho Housing Forgivable Loan is a fixed-rate 5% 10-year loan to be used for down payment assistance. The amount borrowed is forgiven in tiers over a 10-year period. You can combine this loan with the Second Mortgage program if you take out a First Loan, HFA Advantage 50% AMI or 80% AMI loan, or a Heroes Loan. You need to contribute at least 0.5% of your own funds to the down payment, and you’ll need to complete Idaho’s homebuyer education course.

    Recommended: How Much Is a Down Payment on a House?

    6. Idaho Mortgage Credit Certificate

    Idaho’s mortgage credit certificate (MCC) allows homebuyers to claim a credit on their federal taxes for 35% of the mortgage interest they pay each year, up to the federal limit of $2,000 each year.

    Borrowers must live in the home and meet certain income requirements based on the county, sales price limits, loan type, and first-time homebuyer status. They may use any additional interest paid for the federal mortgage interest tax deduction if they itemize. Lenders can help buyers determine if they are eligible for the credit. (More information on MCCs is below.)

    Who Is Considered a First-Time Homebuyer in Idaho?

    In Idaho, first-time homebuyers are considered those who haven’t owned a primary home in the past three years. (For married couples, if either spouse meets the test, they are considered first-time homebuyers, according to the federal definition. Also included are single parents who owned a home with a former spouse, and displaced homemakers who owned a home with a spouse.)

    First-time homebuyer assistance almost always applies to a primary residence only. Investment properties and second homes usually do not qualify. To apply for many (but not all) of the first-time homebuyer programs in Idaho, residents must take a course, which includes information about mortgage programs, improving your credit score, determining how much house you can afford, applying for a mortgage loan, and closing. Courses from Idaho Housing are $20 in person and $50 online.

    If a home buying course is required, best to take it early in the process. In some cases, you won’t be able to close on the house until you’ve shown proof of attendance.

    Recommended: Do You Qualify as a First-Time Home Buyer?

    How to Apply to Idaho Programs for First-Time Homebuyers

    The best way for Idaho residents to get more information about what loans and grants are available is to research the various programs at the Idaho Housing and Finance Association .

    Once you’ve determined which programs may be a good fit for you, you’ll want to estimate how much you can afford in mortgage payments and then compare lenders. It’s important for first-time homebuyers, who may be unfamiliar with the mortgage borrowing process, to compare several lenders’ requirements, rates, and terms to make sure they’re getting the best loan available for their financial situation.

    Recommended: Understanding the Different Types of Mortgage Loans

    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.

    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 in Idaho by county .

    HUD lists FHA loan details and Idaho area housing programs as well.

    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, or formally, the Federal National Mortgage Association, is also a publicly traded government-sponsored enterprise that dates back to the Great Depression.

    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.

    Unlike an FHA loan, the 97 LTV loan has no upfront mortgage insurance fee and does have cancellable mortgage insurance. The loan is for just one-unit single-family homes, co-ops, condos, and planned unit developments.

    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. For most applicants, there is 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 that are guaranteed by the USDA in specified rural areas. Borrowers must also meet USDA income requirements. Mortgage insurance is paid with upfront and annual fees. Eligible properties are listed by region on the USDA website . The Idaho USDA look-up can help you determine if you’re eligible for USDA assistance.

    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.

    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

    First-time homebuyers in Idaho have a robust selection of options to make a home purchase more accessible and affordable. Idaho programs in hand with federal government lending initiatives may help prospective homeowners participate in this vibrant real estate market.

    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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    FAQ

    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.

    Check with your lender, real estate agent, local nonprofit housing advocacy groups, and state housing finance agency for programs in your area.

    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 Idaho?

    Yes. The Idaho mortgage credit certificate program allows homebuyers to claim a federal tax credit for 35% of annual mortgage interest, up to $2,000 each year. There are restrictions based on income, purchase price, and loan type. Lenders can help buyers determine if they are eligible for the credit and, if so, apply for it.

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

    The Idaho Home First Loan program includes VA loans for low-income buyers in specific counties. In addition, Idaho veterans may find options in the federal VA and Native American loan programs listed above, many of which are also available through the Idaho Housing and Finance Association.

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

    Most programs administered by the Idaho Housing and Finance Association require a credit score of 620 or above. But there are other private, state, and federal loan programs that borrowers with lower scores may be able to access.

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

    Data about Idahoans’ age is sparse, but the average age nationally is 33, according to the National Association of Realtors®.


    Photo credit: iStock/SeanPavonePhoto
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