The Ultimate Guide to Paying for Your First Home
Your first home is the biggest purchase you will make (until you sell it and buy another). This guide helps you start on your journey to security and generational wealth.
Your first home is out there, whether in the city, the suburbs, or the countryside. You can put it within your grasp with the help of these programs and resources. / Photographs, clockwise from top left: Oskar Mikols, OM Media, via BHHS Fox & Roach Realtors; Shaun May Photography via Giappo Design+Build; Plush Images via CCL Real Estate, KW Empower; Jonathan Wilson, CaptureIt Wilson Photography, via HomeSmart First Advantage Realty
Buying a home is the biggest single purchase you will make, and it’s the one that will have the greatest impact on your future.
The process can be daunting, especially for anyone buying a home for the first time. And many would-be homeowners find themselves lacking some of what they need to make their first home a reality.
What every first-time homebuyer needs is knowledge and money.
And in order to get the money, it helps to know what you’re about to get into as a home buyer and homeowner. Especially if you don’t know anyone who’s bought one in the past and might be able to advise you. Many lower-income would-be homeowners fall into this category, and many of the programs here are tailored to setting them on the path to homeownership.
Starting with the knowledge first.
Where to Get the Knowledge
Several organizations and programs offer counseling and advice for first-time homebuyers. Just about all of the financial assistance programs listed below require participants to enroll in such programs before they apply for a mortgage or grant. But even if you don’t need financial assistance, participating in one of these programs will help you get a handle on the budgeting and planning skills you will need to make your first home a reality.
All of the housing counseling programs in this region that serve low- and moderate-income homebuyers are approved by the U.S. Department of Housing and Urban Development (HUD). HUD’s Buying a Home website has links to resources you can use in every step of the home-buying process.
If you live in Philadelphia, the city Department of Planning and Development has a Housing Helper that will point you to programs and services for first-time homebuyers the DPD sponsors.
One organization that offers advice to just about everyone is Clarifi (formerly the Consumer Credit Counseling Service of the Delaware Valley). This organization serves residents of all five Southeastern Pennsylvania counties and offers advice and counseling for anyone, regardless of income, zip code or background.
The organizations and resources linked below serve aspiring homeowners in the suburbs. Even if you make too much to qualify for the grants and loans listed in the next section, you should still be able to sign up for counseling, but check with the individual agency to learn about any requirements or restrictions that may apply:
- Bucks County Housing Group — Housing Resources
- Bucks County Housing Group — Housing Counseling
- Housing Partnership of Chester County
- Delaware County Department of Housing and Community Development — Additional Resources
The New Jersey Housing Mortgage and Finance Agency also publishes a useful guide called “The Road Home New Jersey: A Guide for the New Jersey Homebuyer” (PDF) that walks you through the home-buying process. Even if you live outside New Jersey, this guide offers a quick and understandable roadmap for the journey you are about to begin.
Where to Get the Money
Most of the money you will need to buy your first home comes in the form of a mortgage. This is a loan that you pay off over a long time span, typically 30 years. The counseling programs will fill you in on what you need in order to get one.
The mortgage may represent the largest part of the pile you need to buy the house, but you still need money to cover the down payment and closing costs — a non-trivial sum.
Yes, this is something that the personal finance gurus tell you that you should save up for. Most purchase agreements and mortgages assume that the buyer will pay 20 percent of the purchase price up front. But several factors make this difficult for many. For those with lower incomes, so much of the money that comes in goes to day-to-day survival that there’s usually little to left to save. And even those who make decent incomes now find themselves hard-pressed, thanks to recent rises in interest rates and sale prices.
Some people can tap their own (or their parents’) savings to come up with the money, but many cannot. If you’re one of those who cannot, don’t despair. You can get financial assistance from programs in every county of our region.
With some caveats. Most of these programs require that your household income fall below certain limits; those limits vary by household size and location. Some, however, offer assistance to those making as much as the area median household income (AMI) — and that’s where this region’s relative affluence works to your benefit. For instance, a family of four on the Pennsylvania side of the Philadelphia metropolitan area can earn as much as $114,000 and still qualify for assistance under programs that have the AMI as a ceiling. (In New Jersey, the figures vary by county and are lower.)
Some require that applicants already live or work in the county where they plan to buy a house. Many have an upper limit on the purchase price of eligible houses. And all of them require that you make at least a token contribution (usually $1,000) towards the down payment.
These programs also require that you go through a first-time homebuyer counseling program before you either start your house hunt or sign an agreement of sale.
All of these programs offer either grants or zero-interest loans. Some loan programs forgive the loan if you remain in your home for a certain number of years, while others require repayment only when you sell, move out of, or borrow against the equity in your house.
Read on to learn more about your options.
The key to securing your first home is covering the down payment and closing costs. The programs below can help you swing those costs. / Getty Images stock photo by andreswd
Pennsylvania
Statewide
The Pennsylvania Housing Finance Agency (PHFA) offers three programs for first-time buyers.
One is a $500 grant towards down payment and closing costs. This grant is available only to buyers who obtain a mortgage through a PHFA program and make a down payment of less than 20 percent of the purchase price of the house.
The second is the Keystone Forgivable in Ten Years Loan (K-FIT). This second mortgage loan is extended in conjunction with several different PHFA mortgage programs and provides down payment and closing cost assistance for up to five percent of the lesser of the purchase price or the appraised value. The loan amount is forgiven over 10 years, decreasing by 10 percent per year.
A third program, the Keystone Advantage Assistance Loan Program, offers down payment assistance for up to four percent of the purchase price or appraised value, with a $6,000 cap. This zero-interest loan must be repaid over 10 years.
These are all paired with PHFA mortgage loan programs, some of which are available to first-time buyers. Details about the assistance programs and the mortgage loans are available on the PHFA website, but the agency recommends you start your journey to your first home here if you plan on applying for any of its loans or grants.
Bucks County
The Bucks County Housing Group manages the first-time homebuyer assistance program administered by the Bucks County Office of Housing and Community Development. The program offers up to $10,000 towards down payment and closing costs. The county requires that all borrowers receive housing counseling first, so if you want to apply for this assistance, you should start here.
This assistance is available only to households that either live in Bucks County or have at least one member who has worked there for a year or more. This PDF has the rundown of all the requirements.
Chester County
Low- to moderate-income households looking to buy their first home in Chester County may apply for assistance from the Housing Partnership of Chester County. Details about the assistance program are included on the application forms, available in English and Spanish.
Delaware County
The county’s Office of Housing and Community Development (OHCD) funds the county’s Homeownership First Program. This program provides loans of up to $10,000 towards down payment and closing costs to buyers purchasing their first home in the county. If the house is located in a “revitalization area,” the loan is forgiven if the buyer remains in the home for five years; otherwise, the loan is repayable upon a sale or transfer of ownership. The OHCD website has information about the program and how to apply.
Residents of Chester, Haverford Township and Upper Darby should contact their local officials to find out what first-time homebuyer assistance is available in those communities.
Montgomery County
The county’s Department of Housing and Community Development runs the First Time Homebuyers Program. Eligible homebuyers can receive assistance with down payment and closing costs; the amount depends on the sale price, closing costs, mortgage amount and liquid assets available to the buyer. Buyers are expected to contribute at least $3,000 towards the down payment and may not receive assistance if they can contribute 10 percent or more of the sale price towards the total cost.
Anyone who lives or works full-time in Montgomery County may apply. The county will extend assistance to households making as much as the AMI.
The program will cover up to 10 percent of down payment and closing costs, up to a cap of $10,000. Until American Rescue Plan Act funds run out, households making 80 percent of the median or less may receive an additional $15,000 of assistance, and those making 60 percent of less may receive another $30,000.
The county website contains information about the First Time Homebuyer Program and application forms.
Philadelphia County
The city’s Office of Housing and Community Development funds a program called Philly First Home that is managed by the Philadelphia Housing Development Corporation (PHDC). This program offers grants of up to $10,000 or six percent of the purchase price, whichever is less, to help first-time homebuyers cover the down payment, closing costs and even some of the principal amount of the mortgage.
Recipients may combine this grant with grants from other programs but should check with their housing counselor first to see if the grants are compatible with this program.
Information and application forms can be obtained from the PHDC website.
The Philly5000 program aims to create 5,000 new Black and brown homeowners in the city. / Getty Images stock photo by shapercharge
Black and brown would-be homeowners in the city can also learn about the home-buying process and find information on resources to assist them on the journey to homeownership at the Philly5000 site, a program funded by Wells Fargo whose aim is to create 5,000 new Black and brown homeowners in the city.
New Jersey
Statewide
The New Jersey Housing and Mortgage Finance Agency has both a mortgage and a down payment assistance program for first-time homebuyers. The two programs are linked; in order to qualify for the down payment assistance, you must obtain the mortgage.
The First-Time Home Mortgage Program offers a 30-year, fixed-rate, government-guaranteed or conventional mortgage at an attractive interest rate through a network of participating lenders.
The Down Payment Assistance Program provides a no-interest loan of up to $15,000 to help cover the down payment and closing costs. The loan has no monthly payment and is forgiven if you remain in your home for five years.
An additional program for first-generation homebuyers adds another $7,000 to the value of the loan.
The Road Home New Jersey website contains information on these and all other NJHMFA loan programs.
Burlington County
The county’s Department of Community Development and Housing administers first-time homebuyer assistance programs available to county residents.
Documents explaining the process for first-time homebuyers are found at the bottom of the Community Development and Housing website.
Camden County
Camden County’s first-time homebuyer assistance program provides up to $25,000 in assistance for low- and moderate-income first-time homebuyers.
The county program is administered by the Camden County Improvement Authority. More information, including a manual for first-time buyers, can be found on the county’s First-Time Home Buyers website.
The City of Camden has its own, separate first-time homebuyer assistance program. It offers a deferred-payment loan of up to $14,999 to help cover down payment and closing costs. This PDF explains it in detail.
Gloucester County
Gloucester County’s program, like Camden County’s, offers up to $25,000 in assistance. The loan is forgivable over a period ranging from five to 15 years.
The county’s Office of Housing and Community Development administers the program and gives details about it on its website.
Your bank or credit union also has loans and services that help make buying that first home easier. / Getty Images stock photo by DEV IMAGES
And Finally, Your Local Bank
Most banks and credit unions in the Greater Philadelphia area offer special loans and assistance programs for first-time homebuyers. Some resemble the grant and forgivable loan programs listed above and have similar requirements to qualify. Others offer mortgages with lower interest rates or reduced down payments and closing costs; these are usually available to any borrower with good credit regardless of income. Check with your own bank or other banks in your area to find out about the options they offer.
