Thanks to beautiful scenery, relatively affordable mortgage rates and a robust economy, Idaho is a great destination for new homeowners. If you’re thinking about settling in the Gem State, check out first-time homebuyer programs from the federal and Idaho state governments. There are down payment assistance and tax credit programs in addition to homebuyer education and discounted mortgages. Best of all, nearly every would-be borrower will qualify for something. If you’re concerned about integrating your new mortgage into your financial plan, consider enlisting the help of a financial advisor.
Federal First-Time Homebuyer Programs
There are multiple programs that you may qualify for that can help you either get access to the downpayment money you need for a mortgage or a loan that can lower your downpayment, no matter where you live. Here are some of the most popular options.
FHA Loans
| Pros | – Flexible credit approval – Low down payment needed |
| Cons | – Higher down payments for lower credit scores |
| Eligibility | – Credit score of at least 500 – Down payment of at least 3.5% |
| Best For | – Anyone lacking adequate savings for a standard down payment |
The Federal Housing Administration (FHA) program is a very popular first-time homebuyer program in Idaho. Though backed by the FHA, you will apply for a FHA loan through a third-party lender. Reduced interest rates are great, but the biggest benefit of FHA loans is the minimum down payment requirement.
Rather than the typical 20%, buyers only need to provide 3.5% of the home’s value at closing. Plus, almost anyone can qualify for an FHA loan. You need a FICO® credit score of 580 to receive the down payment perk in its full glory, but if your score falls between 500 and 580, you can get an FHA loan by making a down payment closer to 10%.
USDA Loans
| Pros | – Flexible credit approval – No down payment |
| Cons | – Only available in select areas – Only available to those that can’t get a conventional mortgage |
| Eligibility | – Home in an eligible area – Household income within 115% of the local median in most cases |
| Best For | – Low- and mid-income buyers willing to live in the country |
The “Section 502 Single Family Housing Guaranteed Loan Program,” better known as USDA mortgages, was created to attract new homebuyers to rural and semi-rural communities throughout the country. If you’re looking to buy a home in the country, it’s worth looking into a USDA loan.
A 3.5% down payment is nice, but with USDA loans, most applicants won’t pay any down payment at all. You just have to prove that you are a credible borrower and haven’t been able to secure a conventional mortgage. If your score falls a bit lower on the spectrum (500-580), you could still qualify. You will just have to pay a down payment closer to 10%.
VA Loans
| Pros | – No down payment – No private mortgage insurance requirement – Usually comes with reduced closing costs |
| Cons | – Must pay VA funding fee |
| Eligibility | – Credit score of at least 620 – Military members and veterans, their spouses, or other beneficiaries |
| Best For | – Idaho veterans that can’t afford a down payment |
The Department of Veterans Affairs (VA) insures VA loans, which help active and retired military servicemen and women achieve the American Dream they fought to preserve. Most buyers will be eligible for a loan worth 100% of their home’s value. In other words, no down payment.
Plus, since the VA backs part of your risk, you will not have to get private mortgage insurance (PMI), which is usually required for down payments lower than 20%. VA loans also tend to come with low closing costs, meaning even more savings.
Buyers need a credit score of 620 or higher to qualify. You will also need to contribute 1.4-2.3% of your home’s value into the VA fund, depending on the size of your down payment – should you choose to make one at all.
NADL
| Pros | – No down payment – No private mortgage insurance requirement – Usually comes with reduced closing costs – Reduced, fixed rate – Flexible credit approval |
| Cons | – Only available in select areas |
| Eligibility | – Home in an eligible territory – Military members and veterans of Native American descent, their spouses, or other beneficiaries |
| Best For | – Native American veterans without a clean credit history |
The Department of Veterans Affairs also sponsors Native American Direct Loans (NADL), which are specifically designed for Native American service men and women and veterans. Just like with VA loans, NADL loans don’t require any sort of down payment in most cases. They also don’t necessitate any private mortgage insurance and generally come with reduced closing costs.
NADLs are especially beneficial because of their reduced, set interest rate. Don’t worry if your credit score is on the weak side. NADL participants do not need a strong credit history to qualify. Just keep in mind that NADL-supported homes must be located on allotted lands, Alaska Native corporations, Pacific Island territories or federally recognized trusts.
Good Neighbor Next Door Program
| Pros | – 50% discount on home price |
| Cons | – Only available in select areas |
| Eligibility | – Must live in home at least three years – Police officers, firefighters, emergency medical technicians or pre-K through grade 12 teachers |
| Best For | – Public servants without enough savings to afford a home |
The Good Neighbor Next Door Program from the Housing and Urban Development (HUD) is like a thank you to police officers, firefighters, emergency medical technicians, and teachers. For all they do for the community, HUD awards eligible homebuyers with a 50% reduction on the price of their home. Participants are encouraged to use a FHA, VA, or conventional loan to cover the rest of the cost.
To qualify, homes must be located in HUD-designated “revitalization” areas and buyers must agree to live in the home for at least three years. Once the three years are up, you can sell the home and retain any equity and profit.
The Good Neighbor discount is unsurprisingly competitive. After getting past the pre-approval stage, you will enter a lottery with other eligible homebuyers eager to score the same listing.
Fannie Mae and Freddie Mac
| Pros | – Income within the local median |
| Cons | – Higher rates than other federal programs |
| Eligibility | – Any buyers that don’t qualify for other federal programs. |
| Best For | – Any buers that don’t qualify for other federal programs. |
Other federal homebuyer programs are the result of partnerships between an organization and a third-party lender. Fannie Mae and Freddie Mac, on the other hand, are government-sponsored mortgage providers. Technically two different entities, and they offer very similar benefits that anyone buying a first home can benefit from.
Freddie Mac offers the popular Home Possible 97% LTV loan with a 3% down payment. Though you will need to get private mortgage insurance, you can cancel it once you’ve accrued 20% equity in your new home.
With a Home Possible loan, you can choose both the length (15 or 30 years) and terms (5/5, 5/1, 7/1 or 10/1 adjustable rate) of the loan. You do not even need any credit to qualify.
The HomeReady® loan from Fannie Mae also helps low- and moderate-income buyers secure a mortgage without paying a high down payment. To qualify, you must have a minimum credit score of 620 and provide just 3% of the home’s value at closing. It comes with the same cancellable mortgage benefit as the Home Possible loan.
Idaho First-Time Homebuyer Programs
Now, let’s take a look at some of the most popular programs that aim to help first-time homebuyers in the state of Idaho.
Idaho Housing Home Loan
| Pros | – Lower interest rates – Several loan types are available – No down payment or private mortgage insurance is needed in some circumstances – Potential to combine with down payment assistance grants and tax credits to save even more |
| Cons | – Must meet lender and FHA, VA, USDA, or conventional loan requirements |
| Eligibility | – Income and purchase price limits dependent on household size and home location |
| Best For | – Low- and mid-income buyers that need a break on interest rates |
Idaho Housing and Finance Association (IHFA) offers first-time homebuyer programs with discounted rates on 30-year fixed-rate FHA, VA, USDA, and conventional loans. In some cases, IHFA can also lower or eliminate homeowners insurance costs.
Most Idaho Housing loans can be combined with a down payment and closing cost assistance so you won’t have to deplete your savings to achieve the American Dream. Some require that you complete Finally Home!® homebuyer education and pre-purchase counseling, but there are free classes.
Good Credit Rewards
| Pros | – Receive up to 3.5% of your loan – Potential to combine with tax credit to save even more |
| Cons | – Cannot be combined with a gift |
| Eligibility | – Credit score of 680 or 640 if in the First Loan program – Must contribute .5% of the purchase price – Income and purchase price limits dependent on household size and home location – Liquid asset limits dependent on age and income – Must complete homebuyer education |
| Best For | – Homebuyers taking advantage of Idaho Housing programs who need more help to cover their down payment or closing costs |
Homebuyers participating in Idaho Housing loans may be eligible for a second, 10-year fixed-rate loan to help cover down payment and closing costs. Second loans are worth 2.5% of the home’s value, or $8,000 – whichever is lower. It cannot be higher than your down payment amount.
There are a few restrictions with the Good Credit Rewards Program. The minimum credit score is 640, but several loans require a score above 680. Borrowers also must have liquid assets lower than three months’ income, or $5,000 – whichever is greater. This requirement loosens up a bit for borrowers over age 62. In that case, liquid assets can be $10,000.
No matter what, a borrower must contribute at least .5% to the original mortgage from their own funds. Unfortunately, the second loan comes with an interest rate two percentage points above Idaho Housing’s standard interest rates. Also, if all borrowers are first-time homeowners, you will have to complete a Finally Home!® homebuyer course.
Idaho Housing Homebuyer Tax Credit
| Pros | – Reduced federal tax bill – Lasts the entire lifetime of the loan until repayment, refinancing, or sale |
| Cons | – Must pay $300 fee to lender |
| Eligibility | – Idaho Housing, FHA, VA, USDA, or conventional mortgage participant – Income and purchase price limits dependent on household size and home location |
| Best For | – Low- and moderate-income first-time homebuyers in Idaho that want to save on their annual tax bill |
In addition to loan and down payment assistance programs, the Idaho Housing and Finance Association provides eligible homebuyers with a Mortgage Credit Certificate (MCC). Through this program, buyers receive an annual federal tax reduction of up to 35% of the interest paid on their mortgage with a maximum of $2,000 a year.
Borrowers can claim the credit every year for the life of the loan so long as the home remains their primary residence. That usually means about $2,000 a year and tens of thousands of dollars saved over time.
Unused tax credits can be carried forward for up to three years and the MCC can be combined with other Idaho Housing loan products. You will have to pay a $300 fee to your borrower, but that’s a small price to pay compared to the long-term savings.
Tips for Selecting the Right First-Time Homebuyer Program
- A home is likely the largest purchase you’ll make in your life, and a financial advisor can help you prepare your financial plan for it. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Don’t forget to account for closing costs when you’re buying your first home. SmartAsset’s closing cost calculator can help you plan for it.
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