New York First-Time Home Buying Assistance Programs & Grants for 2022

New York First-Time Home Buying Guide

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    By Susan Guillory

    (Last Updated – 08/2022)

    The housing market in New York state can be challenging, especially for first-time buyers. Home prices in the Empire State rose 7.8% from May 2021 to May 2022, with the median sale price of $560,200. The number of homes on the market dropped about 12%, which may explain why houses are selling faster than they were a year ago—34 days versus 52 days in May 2021. And 46% of homes sold above their listing price.

    If you’re a first time homebuyer in New York, this home buying guide can help you navigate the process.

    Who Is Considered a First-Time Homebuyer in New York?

    A first-time homebuyer is someone who has either never owned a home or hasn’t owned one in the past three years.

    In addition, the U.S. Department of Housing and Urban Development (HUD) defines a first-time homebuyer as:

    •  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

    •  Someone who has owned a principal residence not permanently affixed to a permanent foundation

    •  Someone who has only owned a property that wasn’t in compliance with state, local, or model building codes

    Veterans may qualify for some of the same programs first-time buyers do.

    Recommended: Understanding the Different Types of Mortgage Loans

    5 New York Programs for First-Time Homebuyers

    These are the programs that can provide low-interest mortgages and closing cost assistance for qualified first-time buyers in New York.

    1. HomeFirst Down Payment Assistance Program

    This program provides up to $100,000 toward the down payment or closing costs on a one- to four-family home, condo, or coop in New York City.

    To qualify, you must be a first-time homebuyer in New York, meet income eligibility requirements, and complete a homebuyer education program. You must make a down payment of at least 3% of the purchase price, with 1% of that coming from your own funds.

    Contact a counseling agency for more information.

    2. SONYMA: Achieving the Dream

    The State of New York Mortgage Agency offers a 30-year fixed rate mortgage for one- to four-family homes, cooperatives and condominiums. You can put just 3% down, with a minimum cash contribution of 1%.

    To qualify, you must be a first-time homebuyer with good credit and stable employment. There are income limits you must meet, and you will need to attend a homebuyer education course.

    3. SONYMA: Low-Interest Rate Loans

    This program offers low-interest loans and low down payment requirements for the purchase of family homes, condominiums, cooperatives, and manufactured homes.

    You must be a first-time homebuyer with good credit and stable employment to be eligible. There are also income limits you must meet, and a homebuyer education course you will need to take.

    4. SONYMA: Conventional Plus

    Conventional Plus combines a 30-year fixed rate mortgage with down payment assistance for the purchase of a primary home. The down payment assistance can also be used for closing costs. To qualify, you must meet income limits.

    5. SONYMA: FHA Plus

    Another program to check out is FHA Plus, which also combines 30-year fixed rate mortgage loans with down payment assistance for the purchase of a primary home. You need to meet income limits to be eligible.

    Trying to decide what type of mortgage is best for your needs? Learning about mortgage term limits can be helpful.

    How to Apply to New York Programs for First-Time Homebuyers

    Each of the programs we’ve covered has its own criteria for qualification, including income and purchase price limits. Carefully review all programs and requirements to help determine your best option. Then, get pre-qualified with a participating lender .

    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 in Massachusetts by county on the HUD website .

    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 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. For more information, contact [email protected]

    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. Find out more from the New York regional HUD offices .

    First-Time Homebuyer Stats for 2022

    Here’s some data about New York home sales.

    •  Median home price in New York: $560,200

    •  3% down payment in New York: $12,000

    •  20% down payment: $80,000

    •  Average credit score of homebuyer in New York:722

    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. After reading up on how to choose a mortgage term, check out these tips on how to lower your mortgage payment:

    •  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.

    Use this home affordability calculator to see how much you can afford to pay for a home.

    The Takeaway

    Eligible first-time homebuyers in New York can find mortgage and down payment assistance programs to help them pay for a home. There are also federal-backed and conventional loans that may be a good fit for some buyers.

    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.

    View your rate


    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 New York?

    Yes, there is a mortgage credit certificate program for first-time homeowners and those who buy in certain areas in New York. With it, you can claim a portion of your mortgage interest as a tax credit, up to $2,000.

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

    The VA offers low-interest loans to active military members and qualified veterans.

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

    It depends on the program. New York’s first-time homebuyer programs often don’t require specific credit scores. But other programs do. For instance, the FHA program requires a minimum credit score of 500 to qualify.

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

    In the U.S., the median age of first-time homebuyers is 33.


    Photo credit: iStock/Ryan Herron
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