Rhode Island First-Time Home Buying Assistance Programs & Grants for 2024

Rhode Island First-Time Home Buying Guide

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    By Susan Guillory

    (Last Updated – 07/2022)

    This small state is big on charm: Rhode Island’s miles of coastline offer beautiful beaches and picturesque inlets, and you’ll also find dynamic cities and rural small towns here. There’s a lot for the first-time homebuyer in Rhode Island to get excited about, and this can be a good time to purchase. The average home value is $429,686, with just a 1.31% increase from April to May 2022.

    The inventory of available homes is limited however, and there are currently only 1,067 homes on the market. Houses are selling for $32,700 more than the annual average and 15 days faster.

    Read on for information on federal and state programs that can provide low-interest mortgages and help with the down payment and closing costs.

    Recommended: This first-time home buying guide will help walk you through the process of purchasing a house.

    Who Is Considered a First-Time Homebuyer in Rhode Island?

    To qualify as a first-time home buyer in Rhode Island, you have either never owned a home or you haven’t owned a home in the last three years. As a first-time buyer, there are certain types of mortgage loans you’ll want to familiarize yourself with.

    5 Rhode Island Programs for First-Time Homebuyers

    If you’re a first-time home buyer in Rhode Island, you may qualify for one or more of these state programs that provide low-interest mortgage loans and other financial assistance.

    1. RIHousing: First-Time Homebuyer Loan

    RIHousing offers a First-Time Homebuyer Loan for those purchasing a one- to four-family home or eligible condominium, with a maximum price of $546,752.

    To qualify, your annual household income must be:

    •  less than $112,555 for 1 to 2 people

    •  less than $129,438 for a family of 3 or more

    2. RIHousing: First-Time Homebuyer Renovation Mortgage

    Interested in a fixer-upper? RIHousing offers a mortgage that combines the purchase price of the house and renovation costs into one low-interest loan.

    The total purchase and renovation costs can’t exceed FHA Maximum Loan Limits, and you must have a construction contract with a state-licensed general contractor. You are required to take a Homebuyer Education class before closing.

    3. RIHousing: 10kDPA

    Eligible homebuyers can get a 0% down payment loan of $10,000 through this program. You pay the loan when you sell the home or transfer it.

    To qualify for RIHousing 10kDPA , you must be a first-time home buyer and have a credit score of 660. You must also meet housing price and income limits and complete a homebuyer education course.

    4. RIHousing: Extra Assistance

    With this down payment assistance program for first-time home buyers, you can receive funding for up to 6% of the purchase price or $15,000, whichever is lower. You need a credit score of 660. Find out more information here .

    5. RIHousing: FirstGenHomeRI

    This program is for first generation home buyers—meaning someone who doesn’t own a home and whose parents never owned a home during their lifetime or lost the home due to a foreclosure or short sale. FirstGenHomeRI provides $25,000 in down payment and closing cost assistance.

    You must have a credit score of 620, meet housing price and income limits, live in certain communities or areas, and complete a homebuyer education course.

    How to Apply to Rhode Island Programs for First-Time Homebuyers

    The best way to start your application for any of the programs above is to find a participating lender . They will review your finances and criteria to see if you qualify, and they can guide you through the process.

    It may also be helpful to use this mortgage calculator to determine what you’d pay each month for your mortgage.

    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 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.

    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, 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.

    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.

    First-Time Homebuyer Stats for 2022

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

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

    •  Average down payment in Rhode Island (20%): $79,980

    •  Average home price in Rhode Island: $399,900

    •  Average credit score of home buyer in Rhode Island: 723

    Financing Tips for First-Time Homebuyers

    Educate yourself on mortgage basics, learn how to choose mortgage term loans, and then check out this list of tips on how to lower your mortgage payment before you buy your first home.

    •  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: This home affordability calculator will show you how much you can afford to pay for a house.

    The Takeaway

    Rhode Island’s housing market seems to be cooling a bit, and qualified first-time homebuyers may be able to take advantage and save. There are state programs that can help with down payment and mortgage costs. And government-backed and conventional loans offer options for future homeowners in the Ocean State as well.

    Make your dream of being a homeowner come true with SoFi’s competitive mortgage rates and down payments as low as 3% to 5% 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 Rhode Island?

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

    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 Rhode Island?

    Credit score requirements vary, depending on the homebuyer assistance program. For example, some of the programs offered by RIHousing require a credit score of 620.

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

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


    Photo credit: iStock/DenisTangneyJr

    *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.

    †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.

    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.

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