- The Alaska Housing Finance Corporation (AHFC) offers specialized programs to first-time home buyers in Alaska.
- Low-interest programs make monthly mortgage payments more affordable.
- Federal programs give first-time home buyers additional borrowing options.
If you are considering purchasing your first home, you likely have many questions about the process. What is the average age of a first-time home buyer? What should you expect? How can you prepare? How much money do you need to save? Are there educational courses for first-time home buyers? And what loan programs are available for first-time home buyers?
The Alaska Housing Finance Corporation (AHFC) provides specialized programs to those interested in homeownership, including special classes and low-interest mortgage resources. Understanding your options will get you on the road to homeownership faster, and at a cost, you can afford.
Alaska first-time home buyer programs
The AHFC considers anyone who hasn’t owned property in the past three years a first-time home buyer. That means that even if you’ve owned property in the past, it’s possible to take advantage of these special programs.
The AHFC offers two first-time homeowner programs, the First Home and the First Home Limited. General guidelines for these programs include the following:
- Borrowers must take a first-time home buyer course and a free in-person or online home buyer course called Home Choice. This six-hour course also provides a $250 closing credit if you use an AHFC mortgage.
- Veterans may qualify as first-time home buyers in some situations, even if they’ve owned property recently.
- You must be an Alaska resident and purchasing a home in the state.
- The borrower must be current on any child support payments.
- The property must be owner-occupied within 60 days of closing.
Program interest rates are lower than for conventional loans, which makes your mortgage payment lower, allowing you to qualify for a larger mortgage. Let’s go into greater depth about each program and who is a good fit for each.
First Home Limited
The First Home Limited program offers a low-interest rate for eligible first-time home buyers in Alaska who meet specific loan criteria. A first-time home buyer is considered anyone who hasn’t owned a home in the past year unless the borrower purchases it in a “targeted area” or is a qualified veteran.
- A target area is defined by the Housing and Urban Development census tract. To find out if a property is in a target area, check the address here.
- A qualified veteran must be retired, discharged, or released under honorable conditions. Evidence of eligibility, such as a copy of the veteran’s certificate of qualification or Title 38 letter, is required.
Additionally, there are income limits with this program. Income is determined by multiplying the monthly income by 12. The income limits vary by region and household size, and you can view a detailed chart by geographical location. A few examples include:
- Anchorage. There is an income cap of $104,900 for a one- or two-person household and $120,635 for three or more households.
- Fairbanks. There is an income cap of $94,200 for a one- or two-person household and $108,330 for three or more households.
- Sitka city and borough. There is an income cap of $104,349 for a one- or two-person household and $120,001 for three or more households.
- Skagway municipality. There is an income cap of $94,200 for a one- or two-person household and $108,330 for three or more people.
Home purchase price limits also may apply and vary based on geographic location. For example, if you’re purchasing a home in the Anchorage municipality, the purchase price limit is $365,587 for a single-family home and $468,017 for a duplex. However, if you’re purchasing in the Petersburg census tract, the limit is $295,124 for a single-family residence and $377,796 for a duplex.
There are a few other considerations for this loan program, including limitations on what type of property you can purchase. Eligible properties are limited to single-family homes, condos, common interest community units, duplexes, and type 1 manufactured homes. A duplex must be at least five years old and have been occupied as a multiple-family residence for at least the prior five years. Borrowers also must provide a copy of the prior three years of tax returns and read the “First Home Limited Booklet.”
First Home program
The First Home program offers a lower interest rate for borrowers purchasing their first home. Unlike the First Home Limited program, there isn’t a maximum income limit. The program is designed for first-time home buyers who don’t fit the qualifying criteria of the First Home Limited program. There are a few considerations for the program, include the following:
- Ownership criteria. Borrowers must not have owned a property for at least the previous three years.
- Property eligibility. There are property eligibility requirements, and the home must be an owner-occupied single-family residence, condo, standard interest community unit, duplex, or type 1 manufactured home. If you purchase a duplex, at least one unit must be the primary residence of the borrower.
- Documentation requirements. Borrowers need to show federal tax returns for the prior three years.
How can I apply for Alaskan first-time home buyer programs?
The AHFC doesn’t provide the loans but instead approves local lenders to offer the mortgages. There are lenders located throughout the state, and AHFC provides a full list of approved lenders by geographic location.
Consider getting in touch with a lender to explain your circumstances and the program that you’d like to take advantage of. The lender will ask additional questions and find a program that is the best fit for your circumstances.
First-time home buyer programs and private mortgage insurance (PMI)
Regardless of which loan program you select, if you put down less than 20% on your home purchase, you likely will need to pay PMI. For example, a first-time home buyer program may require a 3% down payment. PMI is designed to protect the lender against mortgage default. If you stop making payments, the lender is covered. And with a lower down payment, lenders consider the default risk higher.
The cost of PMI varies, but it can be up to 1% of the loan amount. For example, every $100,000 you borrow could cost $1,000 per year (or around $83 per month). If you purchase a $300,000 home, you could pay about $249 monthly in PMI.
Understanding federal loan options
Besides state options, Alaskan first-time home buyers have access to programs that are available from the federal government. These programs provide a low down payment, low credit score requirements, and other perks. Here is a quick summary of programs popular with first-time home buyers.
Federal Housing Administration (FHA) programs. FHA programs are favorable to first-time home buyers because they address many of the problems new home buyers struggle with. Low credit score? No problem; FHA loans allow credit scores as low as 580. Do you have a small down payment? The minimum down payment required for an FHA loan is only 3.5%.
FHA loans require an upfront fee of 1.75% of the mortgage amount, which can be rolled into your monthly payment. A monthly premium that ranges from .45% to 1.05% of the loan amount is also required.
Veterans Administration (VA) loans. VA loans where no down payment is required are available to current or retired veterans and qualifying military spouses. Credit score requirements also are more lenient than conventional loans. Having no PMI requirement allows borrowers to save hundreds of dollars each month.
U.S. Department of Agriculture (USDA) loans. USDA loans require no down payment and have lenient qualification standards. Instead of traditional PMI, USDA loans require an upfront guarantee fee, which can be rolled into the loan. The annual guarantee is 0.35%. A home purchased with a USDA loan must be the borrower’s primary residence and located in what the USDA considers a rural area.
Making your first home purchase a reality
Purchasing a first home is a big dream for many borrowers. Fortunately, many lending programs don’t require you to make a sizable down payment, have a perfect credit score, or pay a higher interest rate than other borrowers. Instead, you can take advantage of local or federal programs to make a reasonable down payment, minimize your monthly mortgage payment, take advantage of tax credits and position yourself for future financial success. The best place to start is understanding what is available to you and the best way forward.