One of the biggest challenges first-time homebuyers face is coming up with a significant down payment toward their home loan. Lenders typically require a 20 percent down payment for a conventional mortgage loan. Even if you purchase a “modestly priced” home in the $250,000 range, you are looking at a down payment of $50,000 or more. Current homeowners looking to relocate or upgrade can often use their home equity as a down payment — but for individuals and families just starting out, earning a down payment of this size could take years.
Fortunately, there are a number of ways that first-time Atlanta homebuyers can get down payment assistance, lessening the initial financial burden and making it easier to get into their first home.
FHA and VA Home Loans
Qualifying first-time homebuyers can often secure financing with an FHA loan — a government-backed loan that enables you to buy a home with a low down payment, even with an imperfect credit score. Buyers with a 580 or above score can usually secure a loan with a minimum 3.5 percent down payment. For the $250,000 home mentioned above, that would mean a down payment of $8,750 as opposed to $50,000. Even people with a minimum credit score of 500 may qualify for a loan with a 10 percent down payment, often with a relatively low interest rate. This is a great way for first-timers to get started building equity in a new home.
If you have served in the armed forces, another government-backed loan to consider is the VA loan. The benefit of this product is that you can get into your first home for no money down, should you qualify for the loan. You may be eligible for a VA home loan if you meet at least one of the following criteria:
- You were in active service for at least 90 consecutive days during wartime
- You were in active service for at least 181 consecutive days during peacetime
- You served in the National Guard or Reserves for at least six years
- You are the surviving spouse of a service member who died in the line of duty or as a result of service-related disabilities
Down Payment Assistance Through Georgia Dream Program
The state of Georgia offers a great down payment assistance program for first-time buyers called the Georgia Dream Homeownership Program. Qualified applicants of this program may get access to special loan products and between $5,000-$7,500 in grant money, which may go toward a down payment. Buyers with a 580 or above score can usually secure a loan with a minimum 3.5 percent down payment. Applicants to the program must qualify by not exceeding certain income thresholds and maximum home price amounts.
Homebuyer Incentives Through Invest Atlanta
First-time Atlanta homebuyers can also find down payment assistance and other benefits through Invest Atlanta, the city’s official economic development authority.
Invest Atlanta offers a gateway to several key programs that help first-time buyers through various “incentives”, which are essentially loans that are forgivable over time. Most of these programs are eligible for both new homes and existing homes, as well as single-family residences, townhomes or condos.
Applicants must attend an initial Q&A session, enroll in a homebuyer education class and apply for financing through one of the preferred lenders on the agency’s list. From there, first-time buyers may qualify for a number of different programs based on factors such as the location of the home, income and credit score.
Let’s take a closer look at some of these programs.
HOME Atlanta 4.0
This program combines an FHA or VA loan program with a 3.5 percent grant, which may go toward a down payment or closing costs. This grant is forgiven upon closing, which may cancel out the down payment altogether.
Eligibility requirements for HOME Atlanta 4.0 include the following:
- Households must meet maximum income thresholds based on size (e.g. $115,780 for a family of four)
- You must qualify for an FHA loan or VA loan from one of the approved lenders
- Minimum credit score of 660
- Minimum debt-to-income ratio of 45 percent
- The home cannot exceed $358,800 in price
Atlanta Affordable Homeownership Program (AAHP)
A program designed for qualified applicants with low income and assets, the AAHP offers $14,000 toward down payment and closing costs. This amount is forgiven after you have lived in the home for five years.
To be eligible for this homeownership program:
- You must qualify for a VA, FHA or conventional loan with an approved mortgage lender
- You must have a minimum credit score of 580
- You must have less than $10,000 in liquid assets
- You must meet low-income requirements based on family size (e.g. $63,760 for a family of four)
- The home must pass an inspection paid for by the program
- The maximum purchase price is between $213,000 and $227,000 depending on whether it is a new home or existing home and whether you live in DeKalb County or Fulton County
Intown Mortgage Assistance Program (IMAP)
Designed for qualified applicants buying a home inside the Atlanta city limits, this program combines a 30-year loan (conventional, FHA or VA) with a $10,000 grant toward down payment and closing costs. The $10,000 is forgivable when you have lived in the home for 10 years.
Qualifying for this program requires the following:
- A $1000 program fee (to ensure the 10-year commitment for down payment assistance)
- Qualifying for a home loan from an approved lender
- Having no more than $10,000 in liquid assets (i.e. your own funds)
- Minimum credit score between 640-680 depending on the type of loan
- Maximum income requirements based on the number of people in the household (e.g., $99,240 for a family of four)
- Maximum purchase price of $358,800 for FHA/VA loans and $424,100 for conventional loans
ATL Home Renovation Advantage
This program is similar to the IMAP program, except that the homebuyer qualifies for a home renovation mortgage loan. This program incentivizes homebuyers to help revitalize older homes.
Qualifications for this program include:
- A $1200 program fee (to ensure the 10-year commitment for down payment assistance)
- Qualifying for a mortgage loan from a participating lender
- Having no more than $10,000 in liquid assets
- Attending a special class on home renovations
- Minimum credit score is set by the lender
- Maximum income requirements based on the number of people in the household (e.g. $99,240 for a family of four)
- Maximum purchase price of $358,800
Vine City Renaissance Initiative (VCRI)
This program is specially designed as part of the redevelopment of the Vine City neighborhood in Atlanta, incentivizing buyers with $10,000 down payment assistance in return for a five-year commitment to live in the property.
Eligibility requirements for this program:
- A $1000 program fee
- Qualifying for a mortgage loan from a participating lender
- Having no more than $10,000 in liquid assets
- Attending a special class on home renovations
- Minimum credit score is set by the lender
- Maximum income requirements based on the number of people in the household (e.g. $115,780 for a family of four)
- Property must sit within the prescribed boundaries of Vine City for the program
- No cap on purchase price
Down Payment Assistance Programs Sponsored by Counties
Along with the programs mentioned above, certain counties in the Atlanta area also have their own first-time homebuyer programs. Let’s look at a couple of these now.
Gwinnett County: Homestretch Down Payment Assistance
For qualified buyers looking to buy a home outside the Perimeter in Gwinnett County, the Homestretch Down Payment Assistance Program provides a five-year deferred payment loan of $7500 at zero percent interest to go toward a down payment on a new or existing home. The eligibility requirements:
- Must be a first-time homebuyer
- Minimum credit score of 640
- Maximum debt-to-income ratio of 43 percent
- Buyer must earn below 80 percent of the median income rate
- Property must be within Gwinnett County and must pass inspection
- Maximum price of $197,000 for an existing home or $247,000 for a new construction
Fulton County Home Ownership Program (HOP)
This HUD-funded program is designed to help eligible buyers with up to $10,000 in down payment assistance for homes in Fulton County, not including Atlanta, Sandy Springs or Roswell. The loan forgiveness for the down payment is 20 percent per year, so if you stay in the home for five years, you do not have to pay it back.
The eligibility requirements for this program:
- Buyer must earn below 80 percent of the median income rate
- Must qualify with an approved mortgage lender who sets credit score and debt-to-income ratio requirements
- Property must be within Fulton County (excluding Atlanta, Sandy Springs and Roswell) and must pass inspection
- Maximum price of $201,000 for existing homes and $224,000 for new construction
As you can see from this long list of resources, there are many options for down payment assistance for first-time Atlanta homebuyers. If you want to buy your first home in the Atlanta area but are worried about the costs, help is certainly available.
When you are ready to begin house hunting, Atlanta Fine Homes Sotheby’s International Realty can help you narrow the search for your first home. To schedule an appointment, give us a call at 404.237.5000.