First Time Home Buyers 4 MIN READ

New York First-Time Home buyer Programs and Grants of 2021

Written by Home & Money

Key takeaways: 

  • If you’re a first-time homebuyer in New York state, you can access special mortgage programs with lower interest rates and down payment assistance. 
  • The down payment assistance program helps offset upfront costs, and the loan may be fully forgiven after 10 years. 
  • Qualifying military personnel and veterans have access to reduced mortgage rates and special programs. 

Dreaming of your first home in New York? For many people, it can feel like just that – a dream. Especially if you’re in a famously expensive housing market like New York City, scraping up the necessary funds may seem downright impossible.

It’s not! In fact, the State of New York Mortgage Agency (known as SONYMA) offers low-interest mortgages and down payment assistance programs to make first-time homeownership possible even for those with poor credit and low income. Here’s what you should know:

NY First-Time Homebuyer: Achieving the Dream program

The Achieving the Dream program offers lower-interest mortgage rates to first-time homebuyers. A lower interest rate reduces your monthly mortgage payment and helps maximize the amount that you can afford. A few features of the program include: 

  • Low down payment: This program allows a down payment as low as 3% of the purchase price; this can be covered by a down payment assistance program. 
  • Minimal cash contribution: A minimum cash contribution is 1% – or 3% for those purchasing co-ops, even if you qualify for down payment assistance. Regional income limits also may apply. 
  • Home type versatility: These loans are available for one-to-four-family homes, cooperatives, and condos alike. 

Eligibility requirements include that you must be a first-time homebuyer, have good credit and a stable employment history, and occupy the home as your primary residence. (That means you can’t purchase the home and then rent it to someone else.)

There are also rules about the property that you purchase. A few of those requirements include: 

  • Property must be located in the state of New York. 
  • Sales price and appraised value can’t exceed limits for the specific region. 
  • Property type restrictions apply. For example, a property cannot exceed five acres and must have at least 500 square feet of living space. 

First-time homebuyers also must complete an education course. Additionally, if you put down less than 20% toward the purchase, you will have to buy private mortgage insurance. This is an extra monthly cost which can be up to 1% of the home purchase price.

First-Time Homebuyer Programs NY: Low Interest Rate Program 

First-time homebuyers also qualify for SONYMA’s low interest rate program. This program has a low down payment requirement and features a lower-than-average interest rate. The program covers a variety of property types, including one-to-four-family homes, condos, co-ops, and manufactured homes. A few benefits of the program include: 

  • Down payment as low as 3% (down payment assistance up to 3% may be available).
  • Available for one-to-four-family homes, co-ops, and condos. 
  • A 30-year fixed-rate mortgage. 

Qualifying for this mortgage program requires good credit, a stable employment history, and that you occupy the property. Income limits may apply in your county. Additionally, there are requirements for the property, such as: 

  • Property must be located in the state of New York. 
  • Property sales price can’t exceed limits of the program, which vary by region. 
  • The property can’t exceed five acres and must have at least 500 square feet of living space. 

And again, if you put down less than 20% of the property purchase price, you will be required to buy PMI. 

NY First-Time Homebuyer: Veterans

SONYMA also has a program that is available to veterans and active service members that provides a low-interest mortgage. A few benefits of the program include:

  • Interest rate is .375% lower than standard SONYMA interest rates on loans. 
  • Minimum borrower cash contribution is only 1%, while the remaining 2% can be a gift or from another acceptable loan. 
  • This program is compatible with the SONYMA down payment assistance program. 

The first-time homebuyer veterans’ program can be a good option for service members or veterans who want to keep out-of-pocket expenses and monthly payments low. 

New York State First-Time Homebuyer Down Payment Assistance

One of the largest hurdles for first-time buyers is coming up with the down payment. The down payment adds up to tens of thousands of dollars, which is an overwhelming amount for first-time homebuyers. Down payment assistance helps ease that burden. 

SONYMA’s Down Payment Assistance Loan (known as DPAL) is available when you use a SONYMA first-time homebuyer program. If you are required to pay PMI, a DPAL can be used to cover your premium, which can greatly reduce your mortgage payment. Here are some of the benefits: 

  • The interest rate is 0%.
  • There is no monthly payment.
  • Loan is fully forgivable after 10 years.
  • Minimum loan amount is $1,000. 
  • Maximum loan is 3% of the purchase price (up to $15,000).

One important feature of this program is that interest rates on a DPAL are .375% higher than mortgages without a DPAL. Additionally, if you sell or refinance your home within the first 10 years, you may be required to repay all or a portion of the loan amount. 

National First-Time Homebuyer Programs 

The state of New York has attractive first-time homebuyer programs – but for some borrowers, it makes sense to consider national options as well. For example, if you have poor credit and struggle to qualify for a SONYMA program, a national program may be a great fit. Here are a few options that are popular with first-time homebuyers due to their low down payment requirements and flexible credit score rules. 

Federal Housing Administration loan: The FHA loan has a lenient credit score requirement. A borrower with a credit score below 580 still may be approved with a 10% down payment. A borrower with a credit score above 580 may qualify for a down payment as low as 3%. 

Veterans Affairs loan: The VA loan program is available to active military personnel, veterans, and their spouses. There are no down payment or PMI requirements for a VA loan. Additionally, the rules about minimum credit score are lenient. 

U.S. Department of Agriculture loan: If you’re purchasing in a qualifying geographical area, the USDA loan is an attractive option. This loan has no down payment requirement and is available to borrowers with a credit score of 640 or higher. 

Buying Your New York State Dream Home

Feeling a little overwhelmed? We know how it is. Purchasing your first home in New York can be daunting. But once you understand the programs available to first-time homebuyers and narrow down the best options for your finances, the task of buying a home gets much easier. 

First-time homebuyers are in a unique position to take advantage of lower interest rates, low down payment requirements, and down payment assistance. Being aware of the available options helps you step into a program that minimizes your upfront costs and your monthly mortgage payment. And that makes finding your dream home faster, simpler, and more affordable.