Montana First-Time Home Buying Assistance Programs & Grants for 2024

Montana First-Time Home Buying Guide

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    By Susan Guillory

    (Last Updated – 03/2024)

    If you’re looking for wide-open spaces and untamed beauty, Montana has plenty to offer. You won’t feel crowded here — the population density is low. And the lifestyle is quieter, slower, and more peaceful than it is in many other places.

    The biggest challenge for the first-time homebuyer in Montana may be finding a house to purchase: In February 2024, according to Redfin, there were less than 5,000 homes for sale in the entire state, in contrast with Arizona, where there were more than 35,000. The average price of a home in Montana was up 4.5% year-over-year, Zillow reports, and in early 2024 was $448,235.

    If you’re a first-time home buyer in Montana, there are programs to support you as you achieve your dream of owning a home. This home buying guide will show you how to save money.

    Who Is Considered a First-Time Homebuyer in Montana?

    The definition of a may vary, depending on the lender or program you’re working with as you search for a home mortgage loan. Some may stipulate that in order to be considered a first-time home buyer in Montana, you must have never owned a home; others may adhere to the U.S. Department of Housing and Urban Development (HUD) guidelines for first-time home buyers, which include:

    •   Someone who has not owned a home in the last three years

    •   A single parent who has only owned a home with a partner while married

    •   A displaced homemaker who has only owned a home with a spouse

    Be sure to check all program and loan requirements carefully. Not sure where you want to locate in Big Sky Country? Check out a list of the best affordable places to live in Montana.

    Recommended: First Time Homebuyer Guide

    3 Montana Programs for First-Time Homebuyers

    There are several state-based programs that offer low-interest mortgage loans and assistance with closing costs and down payments. Many are income-based, so the first-time homebuyer in Montana may need to meet income limits and other criteria to qualify. Here are the facts you need to know about each program.

    1. Montana Housing: Bond Advantage Down Payment Assistance Program

    If you’re looking for financial assistance to help cover your down payment as a first-time homebuyer, the Montana Housing: Bond Advantage Down Payment Assistance Program may be able to help with this loan of up to 5% of the sale price, with a maximum of $15,000. You must first be eligible for a Regular Bond Program Loan. The down payment assistance is a 15-year amortizing loan with low monthly payments.

    You must also have a Montana Housing 30-year first mortgage to qualify, as well as a credit score of at least 620. You will be required to take a Homebuyer Education class to learn mortgage basics, and provide at least $1,000 cash investment in the purchase.

    2. Montana Housing: MBOH Plus 0% Deferred Down Payment Assistance Program

    This program offers a 0% interest deferred loan that can be used for down payment and closing costs. You can receive up to 5% of the sales price, up to $15,000. The loan is due when you transfer or sell the property or refinance or pay off your first loan.

    To qualify, you need a Montana Housing 30-year first mortgage, a credit score of at least 620, and a debt-to-income ratio that’s no more than 43%. There is a household income limit — $80,000 for 1 to 2 people, and $90,000 for 3 or more.

    You must provide at least $1,000 in cash investment toward the purchase and take a Homebuyer Education class.

    3. Montana Housing: Regular Bond Program

    This program provides lower-income first-time home buyers in Montana with a 30-year, low-interest loan. You must qualify for an FHA, VA, RD, or HUD-184 first mortgage loan to be eligible. Additionally, you must meet income and purchase price limits. Learn more about how to apply here .

    Recommended: Home Affordability Calculator

    How to Apply to Montana Programs for First-Time Homebuyers

    For most of these assistance programs, you’ll need to start by finding a a lender that participates . They can review your information to let you know if you qualify.

    In addition, as a first-time home buyer in Montana, it can make sense to learn about other ways to lower your mortgage payment.

    Federal Programs for First-Time Homebuyers

    There are several federal programs designed for people who have low credit scores or limited cash for a down payment. They can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.

    These 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 FHA loan program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers, who typically need FICO® credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.

    In addition to examining your credit score, lenders will look at your debt-to-income ratio (DTI, your monthly debt payments compared with your monthly gross income). FHA loans allow a DTI ratio of up to 50% in some cases, vs. a typical 45% maximum for a conventional loan.

    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. For a $300,000 mortgage balance, upfront MIP would be around $5,250 and monthly MIP, at a rate of 0.55%, would be around $137. You can learn more about these loans, including FHA loans for refinance and rehab of properties, by reading up on FHA requirements, loan limits, and rates.

    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, which can be used 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.

    Another benefit of VA loans is that they do not require private mortgage insurance (PMI) for borrowers who make a down payment of less than 20%. And they have more flexible credit score requirements. In some cases, even those who have previously been in foreclosure or bankruptcy can qualify.

    Borrowers applying for a VA loan will need a Certificate of Eligibility from the VA so make sure to review a guide to qualifying for a VA loan as a first step in the process.

    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.

    Regional loan centers are closed to the public, but you can contact the Department of Veterans Affairs for Montana at (406) 324-3742, [email protected]. For information specific to the Native American Direct Loan, contact [email protected].

    US 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. For more information, call (406) 449-5050.

    First-Time Homebuyer Stats for 2024

    •   Median home sale price in Montana: $448,235

    •   3% down payment: $13,447

    •   20% down payment: $89,647

    •   Percentage of buyers nationwide who are first-time buyers: 32%

    •   Median age of first-time homebuyers: 35

    •   Average credit score (vs. average U.S. score of 714): 732

    Financing Tips for First-Time Homebuyers

    Now that you’ve learned about a few of the types of mortgage loans you might qualify as a first time home buyer in Montana, it’s time to learn how to choose mortgage term loans that fit your needs.

    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

    If you’re a qualified first-time home buyer in Montana, there are several state programs that offer assistance with a mortgage, down payment, and closing costs in today’s challenging market. There are also federal and conventional loans that can help you purchase your home. Be sure to explore all your options.

    Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

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    Should I take first-time homebuyer classes?

    Yes! These classes are often required for some government-sponsored loan programs. But even if they aren’t mandatory, it’s a great way to educate yourself about the process of purchasing a home.

    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 Montana?

    Yes. The Mortgage Credit Certificate (MCC) here is a dollar-for-dollar federal tax credit equal to 20% of the mortgage interest (not to exceed $2,000). First-time homeowners are eligible for the tax credit every year they occupy the home as their primary residence.

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

    Yes. The U.S. Department of Veterans Affairs offers home loans to service members, veterans, and eligible surviving spouses.

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

    Credit score requirements vary, depending on the homebuyer assistance program. For example, the programs offered through Montana Housing require a credit score of at least 620.

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

    In the U.S., the median age of first-time homebuyers is 35.

    Photo credit: iStock/PhilAugustavo

    *SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

    ¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

    †Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

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