About Federal Housing Grants

Buying a home isn't easy. Between saving a down payment, maintaining a decent credit score and finding a home within your financial means, it can be an overwhelming process. But federal housing grants can help with some aspects of the buying process. These types of grants generally help first-time home buyers buy their own homes with money from the government that they don't need to pay back. There are also different types of federal housing grants depending on where you plan to live and how much money you make.

History

Federal housing grants come from the Federal Housing Administration, or FHA. This department of the federal government was created in 1934 as part of the National Housing Act. The main purpose for creating this was to increase the production of homes throughout the United States, provide home loan insurance programs and reduce unemployment. This, in turn, led to federal housing grants for low-income buyers.

Types

There are two main types of federal housing grants for potential homeowners. The first type is available as Urban Development Grants. Home buyers must meet certain qualifications to be eligible for these types of loans, but the homes that they are considering must also meet certain criteria as well. The potential buyer must have an income that is high enough to afford the mortgage payment in addition to having a decent credit score and a steady job. The home must also qualify by meeting certain standards of quality while having a price that is less than the value cap.
The second type of federal housing grant is called a Rural Development Grant. People with low incomes can use this to purchase and finance homes located in rural areas. Potential buyers qualify for these federal housing grants by falling below a certain income, having decent credit scores and having enough money to pay for closing costs. The home chosen must also meet certain quality and valuation criteria.

Benefits

The main benefit of federal housing grants is that they give people who couldn't otherwise afford to buy a home an opportunity to realize the "American dream." One of the most difficult aspects of buying a home is saving a sizable down payment that many banks and lenders require for financing. Federal housing grants give people a "jump start" in the process. This money either comes from the federal government directly or through a variety of programs with state and local governments and nonprofit organizations to acquire the down payment or make other arrangements.

Warning

Do your research on the variety of grant programs and companies before signing up for one. Some companies have offered programs that have been exposed as "scams" by the IRS for several reasons. One company--AmeriDream and Partners in Charity--had its nonprofit status revoked because it was offering grants and rolling that money into the price of the home. As a result, home buyers weren't getting help because they were still required to pay that money back. Other companies have had similar problems. While the federal government tries to regulate the companies and their practices to a degree, there is still a chance of getting scammed if you're not careful.

Effects

The major effects of federal housing grants are that they have increased the number of homeowners throughout the nation. However, as the number of eligible homeowners increases, so does the demand for houses. This has caused the prices of homes to increase due to a dwindling supply and increasing demand. In addition, this has also led to the manufacturing of more homes and subdivisions to accommodate the growing number of eligible buyers.