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FHFA First-Time Home Buyer Mortgage Rate Discount: Explained

FHFA First-Time Home Buyer Mortgage Rate Discount: Explained
FHFA First-Time Home Buyer Mortgage Rate Discount: Explained

First-time home buyers, there’s good news for you! The Federal Housing Finance Agency (FHFA) has just announced a new mortgage rate discount program specifically for you. With the rising cost of homeownership and high mortgage rates, this relief program is a welcome opportunity to make the dream of homeownership a reality.

The program applies to all eligible first-time buyers using a Fannie Mae or Freddie Mac-backed mortgage, offering conventional rate discounts to help make purchasing a home more affordable. If you’re a first-time home buyer, don’t miss out on this chance to take advantage of discounted mortgage rates. In this post, we’ll go over all the details of the FHFA First-Time Home Buyer Mortgage Rate Discount program, including its eligibility requirements and other mortgage deals and discounts available to first-time buyers.

What is the FHFA First-Time Home Buyer Mortgage Rate Discount?

The FHFA First-Time Home Buyer Mortgage Rate Discount is a government program aimed at helping first-time buyers afford their dream home. This initiative was launched in late 2022 and allows eligible applicants to receive a discount of up to 1.75% on their mortgage rates.

To qualify for this benefit, home buyers must be first-time buyers, use the home as their primary residence, finance their purchase with a conventional mortgage, move in within 60 days of closing, and have a low or moderate household income. This program is available for various types of properties, including single-family homes, multi-unit dwellings, and homes in both urban and rural areas, and can be used for both adjustable-rate and fixed-rate mortgages.

How Does the FHFA Mortgage Rate Discount Work?

The FHFA First-Time Home Buyer Mortgage Rate Discount is a government-sponsored program that waives loan-level pricing adjustments (LLPAs) on conventional mortgages made to first-time buyers. These LLPAs are micro-interest rate modifications based on a variety of factors, including a home buyer’s credit score, down payment size, mortgage type, and the type of property being purchased.

By eliminating these micro-adjustments, the FHFA mortgage rate discount can result in quoted mortgage rates that are up to 1.75 percentage points lower for eligible first-time buyers. This program is designed to make home ownership more accessible and affordable for those who are purchasing their first home.

How Much Can First-Time Home Buyers Save?

The FHFA First-Time Home Buyer Mortgage Rate Discount program offers the potential for significant savings on mortgage rates for eligible first-time buyers. By eliminating or reducing loan-level price adjustments, this program can result in more affordable mortgage rates compared to the typical market rate. A reduction of 1.75 percentage points can translate to a monthly savings of sixteen percent, based on current mortgage interest rates.

These discounts can be particularly beneficial for home buyers with lower credit scores and smaller down payments. By participating in this program, first-time buyers have the opportunity to secure a more financially viable mortgage and take an important step towards realizing their dream of home ownership.

Who Qualifies For the FHFA Mortgage Rate Discount?

There are five requirements that must be met to qualify for the FHFA First-Time Home Buyer Mortgage Rate Discount.

You Must Be A First-Time Buyer

According to the Federal Housing Finance Agency (FHFA), a “first-time buyer” is defined as an individual who has not owned a home in the past three years. However, there are some exceptions to this rule. Displaced homemakers and single parents may still be eligible for the FHFA’s first-time home buyer programs if they previously lived in a jointly-owned dwelling with a spouse and did not have any other joint properties in their names. These exceptions allow individuals who may not have technically owned a home in the past to still benefit from the agency’s home ownership programs and take advantage of the opportunities and assistance they provide.

Your Home Must Be Your Primary Residence

The FHFA mortgage rate reduction is exclusively for main residences, which are defined as properties that the buyer plans to reside in for more than 180 days per year and list as their primary residence. This credit cannot be used for second homes, vacation homes, or properties that will be rented out for less than a year while being purchased. This credit is only available to first-time buyers.

You Must Move In Within 60 Days Of Closing

To be eligible for the reduced interest rate on a first-time homebuyer mortgage, buyers must move into their new home within 60 days of the closing date. If you plan to make renovations to the property before moving in, you should ensure that the house is habitable within two months of purchasing it. Those who are on active duty and deployed are exempt from this requirement.

You Must Be A Low Or Middle-Income Wage Earner

The FHFA mortgage rate reduction for first-time home buyers is a program designed to make homeownership more attainable for individuals with lower and moderate incomes. Only buyers with incomes below the median income for the area they are purchasing in are eligible to take advantage of this program. It’s worth noting that the FHFA allows buyers in high-cost regions to qualify for a 20% income exemption.

You Must Use A Conventional Loan

The Federal Housing Finance Agency (FHFA) oversees Fannie Mae and Freddie Mac, and their First-Time Homebuyer Mortgage Relief Program only applies to conventional loans. Those who intend to use a Federal Housing Administration, Veterans Affairs, or United States Department of Agriculture mortgage are not eligible for this program.

Other First-Time Home Buyer Discounts and Deals

As a first-time homebuyer, there are several options available to you to help make the process of purchasing a home more affordable. One option is the FHFA First-Time Homebuyer Mortgage Rate Discount, which offers reduced interest rates on conventional loans for those with lower and moderate incomes.

Another option is the HomeReady program from Fannie Mae, which offers reduced interest rates for those in low and moderate income census tracts and requires a minimum 620 FICO score.

Additionally, the Home Possible program from Freddie Mac is available to those with low and intermediate incomes and reduces the requirements for mortgage approval, while also limiting loan-level price revisions. This program requires a minimum 660 FICO score.

There is also the potential for a grant of up to $25,000 through the Downpayment Toward Equity Act, which is currently being considered by Congress and would be available to first-time and first-generation homebuyers.

Additionally, the First-Time Home Buyer Tax Credit Act could offer tax credits of up to $15,000 to first-time homebuyers, although this has not yet been passed by Congress.

Other options include USDA loans, which offer low interest rates and do not require a down payment for those in rural and suburban areas, and VA loans, which are insured by the Department of Veterans Affairs and offer low interest rates to active-duty service members and veterans.

You may also be able to find assistance through state and local government programs, or through charity organizations.

To learn more about the options available to you, it may be helpful to research the availability of housing in your area through the website of the Department of Housing and Urban Development, and to contact program administrators to check your eligibility.

Bottom Line

The FHFA First-Time Home Buyer Mortgage Rate Discount program is a government initiative that offers reduced interest rates on conventional mortgages for eligible first-time homebuyers. To qualify for this program, applicants must be first-time homebuyers, use the home as their primary residence, finance their purchase with a conventional mortgage, move in within 60 days of closing, and have a low or moderate household income.

This program can result in significant savings on mortgage rates and can help make homeownership more accessible and affordable for first-time buyers. However, it is important to carefully research and verify information about mortgage programs before making any decisions about financing the purchase of a home.

Written by Manoj Kumar

A tech and gaming aficionado, Manoj enjoys the small pleasures of life. He comes with over 10 years of experience in digital space with nearly 2 years of experience in the entertainment news section.

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