Summary of homebuyer assistance programs for first responders and teachers
There are a wide range of low down payment mortgage programs and closing cost assistance programs available to all eligible borrowers as well as a smaller number of programs that are targeted to teachers and first responders including firefighters, emergency medical technicians (EMTs) and law enforcement officers. We review several of these homebuyer assistance programs below.
HUD Good Neighbor Next Door Program
The Department of Housing and Urban Development (HUD) offers the Good Neighbor Next Door Program to enable firefighters, as well as EMTs, teachers and law enforcement officers to buy homes in designated “revitalization areas” at a 50% discount to the list price of the property. For example, if a property is for sale for $200,000, you can buy the home for only $100,000.
You receive the discount on the purchase price through a silent second mortgage. You are not required to pay interest on the silent second as long as you live in the property as your sole residence for 36 months. You can learn more about the program by visiting the HUD website below.
HUD Good Neighbor Next Door Program Website
If you sell the property after the required occupancy period, you are required to repay the silent second principal but you are not required to pay interest. If you move out of the property before the end of the occupancy period you are required to repay the silent second on a prorated basis.
To qualify for the program, you must buy a one unit property listed for sale by HUD in a revitalization area at the list price -- there is no negotiating the purchase price. Additionally, all properties are offered on an “as is” basis which means you buy the property in its current condition with no warranty if you find an issue or defect with the property.
Check the HUD Homes website for property listings
You do not need to be a first time home buyer to qualify for the program but you cannot own any other properties for the year prior to submitting your offer to buy a home.
How to Submit an Offer on a Good Neighbor Next Door Property
To submit an offer -- also called a contract -- on a Good Neighbor Next Door home you are required to provide an earnest money deposit equal to 1% of the property list price. The minimum deposit required to bid on a property is $500 and the maximum deposit is $2,000. For example, if the property list price is $150,000, you are required to make a $1,500 deposit when you submit your offer.
It is important to highlight that you must provide the earnest money deposit when you submit your offer and not after your offer is accepted by HUD. If your offer is accepted, your earnest money goes toward the purchase price and closing costs. If your offer is not accepted, the money is refunded to you in full.
Please note that if your offer is accepted and you fail to complete the property purchase, you may lose your deposit. This is why it is important that you are pre-approved for a mortgage before you submit your offer on a Good Neighbor Next Door property. That way you know you can close the purchase transaction.
Use our get pre-approved form to get approved before you shop for a home. Using our form is free, no obligation and and does not affect your credit. Getting pre-approved enables you to submit an offer on a home with more certainty and speeds up the mortgage process.
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How to Get a Mortgage for Good Neighbor Next Door Home
If your offer on the property is accepted, your next step is to move forward and get final approval for your mortgage to purchase the home. To finance the remainder of the purchase price not covered by the silent second discount you obtain a mortgage through a traditional lender such as bank, mortgage broker or credit union.
You can use a conventional, FHA or VA mortgage to buy a home offered through the Good Neighbor Next Door Program. You can also combine these programs with a closing cost grant or down payment assistance program to make buying a home more affordable.
If you use an FHA mortgage, you are only required to make a down payment of $100 and you can add your closing costs to your mortgage amount. If you are short on funds to pay for closing costs, an FHA mortgage may be a good option for you for this reason.
The table below shows mortgage rates and fees for FHA lenders in your area. We recommend that you contact multiple lenders to understand the mortgage you can afford and to find the best loan terms.
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Low Down Payment Mortgage Programs
There are also numerous no and low down payment mortgage programs that make owning a home more affordable. While these programs are available to all applicants and not just firefighters or first responders, they enable you to buy a home with a down payment of 3.5% or less. In many cases you can combine these programs with a down payment assistance program or closing cost grant to buy a home with minimal personal financial contribution.
No and low down payment programs have different qualification requirements for borrower credit score, debt-to-income ratio, mortgage limits, applicant income limits, property type and loan type. Popular low down payment mortgage programs include the HomeReady, HomeOne, FHA and USDA programs. We recommend that you review our informative comparison below to find the program that best meets your financial profile.
Review our Comparison of Low Down Payment Mortgage Programs
No and low down payment mortgage programs are offered by participating lenders such as banks, mortgage brokers and credit unions.
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Closing Cost Assistance Grants
Closing cost assistance programs help you pay for all or part of your closing costs when you buy a home. Most closing cost assistance programs are structured as a grant that you are not required to repay as long as you own the home for a specified period of time.
Review How a Closing Cost Assistance Grant Works
Closing cost grants are typically provided by HUD-approved state and local housing departments or commissions in conjunction with participating lenders. Your local housing commission may also offer additional homebuyer assistance programs specifically for firefighters, EMTs, other first responders and teachers.
Visit the HUD website below and select your state to be directed to information about local home buying programs that are available to you.
Sources
"Good Neighbor Next Door." HUD. U.S. Department of Housing and Urban Development, 2020. Web.
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