There are government grants that can help families and individuals acquire the homes of their dreams. These grants are funded by the federal government to state and local municipalities. Myths abound concerning housing grants written directly to individuals and families attempting to purchase a home, and they are false. Homeownership programs do exist through local housing authorities and designated nonprofit organizations in areas of homeowner certification and education to help future homeowners.
Misconceptions About Housing Grants
There are misconceptions about housing grants involving the federal government directly “giving” money to homebuyers. According to the U.S. Department of Housing and Urban Development, the government does not give grants directly to individuals.
There are for-profit organizations advertising services that promise “free money” from the federal government to obtain and build houses. These are fraudulent claims that should be investigated through a local housing association or HUD office.
Facts on Housing Grants
Housing grants are funded through the annual federal budget. The Department of Housing and Urban Development allocates funds to state government and local municipalities by using a formula grant process. HUD "defines" formula grants as “grants from federal or state government where a determined amount of money or value is based on a socioeconomic standard."
For example, HUD may award a formula grant to a local municipality to create affordable housing where the poverty rate is above 40 percent. The amount awarded to each jurisdiction or municipality will depend on how many cities have a poverty rate of 40 percent.
Housing Grant Funds Are Administered by Qualified Organizations
Once the federal government grants housing funds to state and local municipalities, those entities can use portions of housing grant funds to address the area of homeownership.
The source for all government grant housing initiatives is HUD. HUD created the federal housing programs, including HOME program guidelines for first-time homebuyers seeking to buy a home in which a down payment or closing cost assistance amount is paid for by a grant through a nonprofit provider.
HUD chooses nonprofit providers based on their experience in homeownership programs. HUD has a list of nonprofit providers that have homebuyer programs and seminars for individuals to attend. This information can be found at HUD's website (www.hud.gov) or by calling your local HUD office.
Role of Nonprofits
Nonprofits are a key in developing homeownership programs and have taken a lead role in ensuring that people are aware of homeownership opportunities that are funded by grants through local and state government. Nonprofits also provide homeowner certification programs through agencies that are certified as appraisers.
With the assistance of HUD, state and local municipalities can identify and fund nonprofit organizations to provide services to people seeking to buy a home. Nonprofits also provide technical assistance to other nonprofits concerning homeownership program development.
HOME Grant Program
The HOME grant program, administered by HUD, is a certified program that operates through a federally registered nonprofit organization. This program provides cash grants and gifts to homebuyers who enroll in homeownership programs. Funds are made available to the homebuyer if the individual completes required credit counseling courses, homebuyer courses and personal budgeting courses meeting the requirements of the provider.
There is a two- to three-month training requirement for most HOME grant programs. At the end of training, the homebuyer can use the “grant” or “gift” for a down payment, closing costs or other qualifying items. Funds issued through the HOME grant program do not require repayment.