Free Government Grants for Mortgage Help

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Grants for homes are available during the purchasing process.
Grants for homes are available during the purchasing process. (Image: "New home next door" is Copyrighted by Flickr user: Casey Serin (Casey Serin) under the Creative Commons Attribution license.)

Though buying a home can be a daunting process, there may be grants that can at least help in financing the purchase. Home buyer grants are usually granted early on in the buying process, before a mortgage is ever issued. The main purpose of the grant is to help lower the buyer's monthly mortgage obligation. After the purchase papers have been signed, there are very few opportunities for government grant assistance.

Types

Though most grants will not pay anywhere close to the full amount of a home, they can help somewhat. Some states, for example, may offer down payment assistance through a housing authority. Others may offer help with the closing costs. In the case of closing costs, money that normally would have been spent on that expense could be used to provide a larger down payment. The grants vary by state or local area. Check with your local or state housing authority for more information.

Function

In most cases, grants are in the form of checks or electronic transfers that go to you or your bank to help cover some of the costs. In some cases, tax credits, which offer you an advantage on your next year's taxes, may be the method chosen. For example, the federal government offered an $8,000 first-time home buyers tax credit throughout 2009 and may offer it again in future years. A tax credit functions the same as a grant, putting money directly into the recipient's pocket.

Effects

The overall effects of free government grants for mortgage help are easy to see by doing a simple calculation using a financial calculator. If a home buyer were planning to finance $100,000 for a home and were able to receive $11,000 in grant money, payments would go from $612 to $549 per month at 6.5 percent interest, not counting insurance escrow.

Considerations

The availability of grants is usually dependent on income. Those who make above a certain amount may not be eligible at all, or may not be eligible for as much as those with lower incomes. It is important to check with your lender and housing authority to make absolutely certain that you qualify.

Other Conditions

Besides income guidelines, other requirements or restrictions may be in place. For example, individuals often must work through a government-approved lender. Further, there may be restrictions concerning the cost of a home or even its location.

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