Louisiana First-Time Home Buying Assistance Programs for 2022

Louisiana First-Time Home Buying Guide

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    By Walecia Konrad

    (Last Updated – 06/2022)

    The Louisiana housing market isn’t quite as overheated as much of the rest of the nation is, but it mirrors many of the same trends. Home prices are rising and the number of homes for sale is declining, a scenario that can make first-time home buying a challenge.

    Home prices increased 8.7% year-over-year in April to a median of $262,600. That’s far less of an increase than the national jump of 15.5%, but still a healthy rise. The number of homes sold fell 5.2%, and the number of homes for sale dropped 21.9%, according to the real estate firm Redfin. The hottest three markets in terms of rising sale prices were Covington, Hammond, and Slidell.

    Louisiana offers several first-time homebuyer programs for low- and middle-income residents that can help newcomers break into the Pelican State’s real estate market. For many but not all programs, a credit score of at least 640 is required to qualify for a mortgage. In addition, several federal programs are designed for first-time and low- to moderate-income buyers.

    7 Louisiana Programs for First-Time Homebuyers

    The Louisiana Housing Corp. (LHC) allocates federal and state funds to low- and moderate-income homebuyers. It was created in 2011 in a merger of the Louisiana Housing Finance Agency with housing programs from other state agencies, including the Disaster Housing Task Force. The move helped centralize Louisiana’s housing policies and programs.

    Many of LHC’s programs allow the purchase of a variety of properties, including single-family homes, condominiums, townhomes, modular homes, and manufactured homes. Here’s a closer look at LHC’s programs for first-time homebuyers, generally those who haven’t owned a principal home within the past three years.

    1. LHC Mortgage Revenue Bond Home Program

    This program is designed for buyers with incomes up to 80% of the area median income. Mortgage rates are usually below market, and down payment and closing cost assistance ranges between 5% and 9%, depending on the amount of the loan. Discounted mortgage insurance premiums are also available. There are purchase price limits. Candidates must have a minimum credit score of 640 and complete a homebuyer education course.

    2. LHC Mortgage Revenue Bond Assisted Program

    This program helps first-time homebuyers and repeat buyers who plan to live in designated areas. Buyers in these areas with up to 140% of area median income may qualify. Interest rates on these loans are usually in line with the market. Down payment assistance up to 4% of the purchase price is available through a second mortgage program.

    Candidates must have a credit score of 640 and complete a homebuyer education course. The purchase price may not exceed limits set by the program.

    3. LHC Market Rate Conventional Program

    These loans are available to first-time homebuyers and repeat buyers with 80% of area median income or less. Rates for 30-year fixed mortgages are competitive, and reduced mortgage insurance is available. The loan can be paired with LHC’s down payment assistance programs.

    First-time buyers will need to complete a homebuyer education course; the 640 credit score minimum exists for all buyers. Unlike other LHC programs, this loan can only be used to purchase a single-family residence, and maximum loan amounts exist.

    4. LHC Market Rate GNMA Programs

    LHC offers mortgages through the Government National Mortgage Association (Ginnie Mae), including 30-year fixed-rate FHA, VA, or USDA mortgages at competitive interest rates for first-time and repeat buyers. These loans are available only for single-family homes.

    A credit score of 640 or above is required. Household income may be as much as 115% of area median income, and up to 4% down payment and closing cost assistance is available.

    5. LHC Delta 100 Program

    The Delta 100 is aimed at first-time homebuyers without a credit history in specific Louisiana parishes. Mortgages are 30-year fixed at 2% interest, with up to 3% closing cost assistance. The Delta 100 program offers 100% financing, so no down payment is required.

    No credit score is needed. The loans can only be used for single-family homes. Buyers must have sufficient cash reserves and complete a homebuyer education course.

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

    6. Louisiana’s Resilience Soft Second Program

    This program offers first-time homebuyers in the 51 parishes impacted by the 2016 floods a second mortgage of 20% of the home’s purchase price, up to $55,000. A maximum of $5,000 in closing costs is also included. Buyers who stay in the home as their primary residence for 10 years qualify for loan forgiveness.

    To qualify, buyers must have income at or below 80% of the area median income, a credit score of 640 or above, and a maximum debt-to-income ratio of 48%. In addition, they must be buying a single-family home, condo, or townhome under certain purchase price limits and must complete a homebuyer education course.

    7. Louisiana Mortgage Credit Certificate Program

    Qualifying first-time homebuyers, veterans, and low- to moderate-income buyers purchasing a home in designated areas can take a federal tax credit of 40% of their annual mortgage interest payments, up to $2,000 per year. Household income limits depend on the property location and household size. The credit can be taken for as long as the property is the buyer’s primary residence.

    Who Is Considered a First-Time Homebuyer in Louisiana?

    The Louisiana Home Corp. defines first-time homebuyers as people who have not owned a principal residence in the past three years (if married and either spouse meets the test, both do). In some cases, LHC also designates single parents who have only owned a home with a former spouse as first-time homebuyers.

    Recommended: First-Time Homebuyer Guide

    How to Apply to Louisiana Programs for First-Time Homebuyers

    Get information and help figuring out if any of the programs listed above are right for you on the Louisiana Home Corp. website. Purchase price and income limits for the Mortgage Revenue Bond programs are also on the site.

    LHC is not a lender, but the agency provides a list of approved partners for each program that you can use to find and compare lenders in your area.

    For many programs, completion of LHC’s homebuyer education is required. This can help buyers understand how much mortgage they can afford and estimate monthly payments.

    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 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 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 view the FHA lending limits in Louisiana and find an approved FHA lender near you.

    Freddie Mac Home Possible Mortgages

    Very low- and low-income borrowers with a credit score of at least 660 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.

    Once you pay 20% of your loan, the 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. You’ll 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 information about Fannie Mae lenders in your area, contact the Fannie Mae Resource Center .

    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 it does have cancellable mortgage insurance. The loan is for just one-unit single-family homes, co-ops, condos, planned unit developments, and eligible manufactured homes.

    Department of Veterans Affairs (VA) Loans

    Active-duty members of the military, veterans, and some surviving spouses 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 0% down loans to buy, improve, or build a home on federal trust land. The Department of Veterans Affairs is the lender for NADLs. The funding fee applies.

    U.S. Department of Agriculture (USDA) Loans

    No down payment is required for USDA-backed loans for property in specified rural areas. Borrowers must meet income requirements, and there are fees associated with these loans. Eligible properties are listed by region on the USDA website .

    U.S. Department of Housing and Urban Development (HUD) Good Neighbor Next Door Program

    Police officers, firefighters, emergency medical technicians, and teachers can receive 50% off a home in a “revitalization area.” To qualify, borrowers must live in the home for at least three years. HUD offers more information on homeownership programs in Louisiana on its website.

    Louisiana Homebuyer Stats for 2022

    Here’s a snapshot of the typical home purchase in Louisiana.

    •  Average sale price: $300,000

    •  Minimum down payment (3%): $9,000

    •  20% down payment: $60,000

    •  Average credit score: 684

    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. Recommended: 6 Simple Ways to Reduce a Mortgage Payment

    The Takeaway

    To provide opportunities to buy safe, affordable, and energy-efficient housing, Louisiana supports several first-time home buying programs that can help residents achieve their goal of homeownership. In addition to statewide programs, there are initiatives for residents living in specific parishes. Low- and moderate-income Louisianans may find alternatives among the federal government’s first-time homebuyer programs.

    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.

    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 Louisiana?

    Yes. The Louisiana mortgage credit certificate program allows first-time homebuyers to claim a federal tax credit for 40% of annual mortgage interest, up to $2,000 each year. There are restrictions based on household size and income and property location.

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

    Many of the Louisiana Home Corp. first-time buyer programs include veteran benefits. Louisiana veterans also may find options in the federal VA loan programs.

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

    Most programs administered by the Louisiana Home Corp. require a credit score of 640 or above. But borrowers with lower scores may be able to access other private, state, and federal loan programs.

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

    There’s little data available to track the average age of first-time homebuyers in Louisiana, but the average age nationally is 33, according to the National Association of Realtors®.


    Photo credit: iStock/Rebecca Todd
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