North Dakota First-Time Home Buying Assistance Programs & Grants for 2022

North Dakota First-Time Home Buying Guide

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    By Susan Guillory

    (Last Updated – 07/2022)

    Thinking about moving to North Dakota? The state has a lot going for it. In addition to tons of open space, gorgeous landscapes, and a relaxed way of life, the cost of living is low (it’s 1.21 times less expensive than the U.S. average) and so is the tax rate.

    While home prices in the state have increased 40.4% in less than a decade, that growth is slowing slightly. In the last year, the median home value rose just 1.4%, to $235,998. That means there are plenty of opportunities to find your affordable dream home in North Dakota.

    This home buying guide was created with the first time home buyer in North Dakota in mind. It includes both state and federal housing programs that can help with a mortgage, down payment, and closing costs.

    Who Is Considered a First-Time Homebuyer in North Dakota?

    The definition of “first time home buyer in North Dakota” may vary, depending on the types of mortgage loans and financial assistance you’re looking at. Some may require you to have never owned a home at all, while others may consider you a first-time homebuyer if you are a single parent who has only owned a home with a partner while married, or a displaced homemaker who has only owned a home with a spouse.

    It’s a good idea to be clear on each program’s eligibility requirements before you apply.

    4 North Dakota Programs for First-Time Homebuyers

    There are several state programs that provide financial assistance and low-interest mortgage loans to the first time home buyer in North Dakota. Many of these programs are designed to help low- to moderate income buyers, and they may have income and purchase price limits, a required credit score, or other criteria you’ll need to meet.

    The North Dakota Housing Finance Agency offers the following for first-time homebuyers:

    1. NDHFA: FirstHome

    The North Dakota Housing Finance Agency’s First Home program provides low-interest mortgages to low-income first-time buyers.

    To qualify: You must be a first time home buyer in North Dakota (you can’t have owned a principal residence in the last three years) and you must meet income and purchase price limits. You are also required to make a $500 investment and occupy the home as your primary residence, and you’ll need to take a homebuyer education class.

    2. NDHFA: Down Payment & Closing Cost Assistance

    NDHFA also offers assistance with down payments and closing costs. The assistance equals 3% of the first mortgage loan amount and comes as a credit toward your out-of-pocket cash requirement.

    To qualify: You must meet the income limits for your family size and county. This option only applies for one- or two-unit properties, and one unit must be occupied by you. You’ll need to complete a homebuyer education course.

    3. NDHFA: HomeAccess

    While it’s not exclusively for the first time home buyer in North Dakota, the HomeAccess program offered by NDHFA may be worth looking at, especially if you are a single parent, a veteran, disabled, or over age 65.

    To qualify for affordable financing for a home, you must meet income and purchase price limits.

    4. NDHFA: Start

    Another option for low- to moderate-income buyers is the Start program. This program, which is not just for first-time buyers, offers affordable financing that includes down payment and closing cost assistance, up to 3% of the first mortgage.

    To qualify, you must be purchasing a one- or two-unit property and living in one unit.

    How much home can you afford? Use this home affordability calculator to find out.

    How to Apply to North Dakota Programs for First-Time Homebuyers

    Carefully review the requirements for all first-time homebuyer programs in North Dakota, particularly income and purchase price limits, to see if you meet the criteria. You’ll generally need to contact a lender to participate in any given program.

    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 North Dakota 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.

    Regional loan centers are closed to the public, but you can contact the North Dakota Department of Veterans Affairs .

    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 learn more from the North Dakota Department of Veterans Affairs.

    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.

    For more information, you can contact HUD’s office in North Dakota at (701) 239-5136.

    First-Time Homebuyer Stats for 2022

    •  First-time homebuyers nationwide: 34% of all buyers

    •  Median age of first-time homebuyers in U.S. 33

    •  Average down payment in North Dakota (20%): $54,230

    •  Average home price in North Dakota:$271,140

    •  Average credit score of home buyer in North Dakota: 733

    Financing Tips for First-Time Homebuyers

    As you learn about mortgage basics and how to choose mortgage term loans, you may want to also learn how to lower your mortgage payment. Here are some tips that can help.

    •  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.

    And finally, here’s a mortgage calculator you can use to figure out what your monthly payments for a home would be.

    The Takeaway

    Qualified first time homebuyers in North Dakota may be able to take advantage of any one of a number of state programs that provide low-interest mortgages and down payment assistance. There are also federal programs and conventional mortgage options to help you afford a home of your own.

    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 North Dakota?

    Yes, there is a mortgage credit certificate program for first-time homeowners and those who buy in certain areas in North Dakota. 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 North Dakota?

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

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

    Credit score requirements vary, depending on the homebuyer assistance program. FHA loans offer lower interest rates for borrowers with credit scores of at least 580, while the Home Possible mortgage requires a credit score of at least 660.

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

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


    Photo credit: iStock/Jacob Boomsma
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