Federal Government Home-Buying Assistance Programs

FHA Loan

The Federal Housing Administration, or FHA, makes it easy for first-time homebuyers to obtain a home loan. FHA-insured loans allow mortgage professionals to relax qualifying standards. As of January 2011, FHA loans require the homebuyer to have a minimum credit score of 640 and money to make a 3.5 percent donwpayment toward the purchase of the home. You don't have to be a first-time homebuyer to apply for an FHA loan, however, you cannot have any other outstanding FHA loans to obtain one.

The American Dream Downpayment Initiative, or ADDI, helps first-time homebuyers with down payment and closing costs for the purchase of a home. A first-time homebuyer is anyone who has not purchased a home within three years of submitting their loan application. Qualified applicants can receive up to $10,000 or 6 percent of the home's purchase price, whichever is greater. ADDI funds can also be used toward rehabilitating a home. Repairs must be made within one year of receiving the funds.

The Homeownership Program is for Section 8 Housing Choice Voucher holders who want their rental assistance payment to go toward the purchase of a home. To be eligible for the Homeownership Program, the applicant must be a current participant in the Section 8 program. The homebuyer must also have been employed for at least a year and meet the minimum income requirement. The homebuyer is required to attend a homeownership education seminar. She must also be able to qualify for a home loan with a lender.

HUD provides HOME funds to local governments and nonprofit agencies to administer homeownership programs to their communities. Agencies use HOME funds to develop or rehabilitate a property and sell the home to qualified homebuyers at an affordable price. Organizations such as Habitat for Humanity and ACORN Housing Corporation are examples of organizations that use HOME funds to develop homeownership opportunities for low-income households. The HUD website has a list of organizations that administer homebuying programs. HOME funds can also be used in conjunction with the Homeownership Voucher program.