Are you ready to make the dream of homeownership a reality? If you’re like many first-time buyers, the biggest challenge you face is coming up with the down payment. In 2019, 26% of first-time homebuyers said saving for their down payment was the greatest hurdle to buying a home compared with 7% of repeat buyers. The burden is greatest for millennials with 48% saying the down payment was their primary barrier to homeownership. Many buyers struggle with student loans, credit card debt, and high living expenses that make saving challenging. Rising home prices mean the minimum you need to save is a constantly moving benchmark, and Rhode Island home prices recently hit a new record of $385,000 in 2021, up 25% from the previous year!
This doesn’t mean you should have a bleak outlook. Thanks to a range of first time homebuyer programs in Rhode Island, buying your first home is easier than you may think! You can qualify for up to $20,000 in down payment assistance (depending on the city and program), tax credits of up to $2,000 per year, and first time homebuyer loans in Rhode Island with easier requirements than conventional loans.
Here’s a comprehensive guide to the best programs for a Rhode Island first time homebuyer and programs specific to Providence, Cranston, and Woonsocket.
First Time Homebuyer Tax Credits & Down Payment Assistance in Rhode Island
Are you struggling to save up for a down payment? Worried about the affordability of owning a home? As a first-time homebuyer, you may qualify for a variety of programs that make it possible to qualify for a mortgage and afford a home.
Mortgage credit certificates (MCCs) are one option. They do not help with financing, but they lower the cost of homeownership over the life of the loan. Down payment assistance can come in the form of a grant or a loan. Depending on the program, it may be a second mortgage with low interest, a silent second mortgage only due when you sell your home, or a grant with no repayment required.
FirstHomes Tax Credit | RIHousing
One of the most powerful programs available to a first time homebuyer in Rhode Island is the FirstHomes tax credit. This Rhode Island first time homebuyer tax credit makes homeownership more affordable with credit of up to $2,000 per year to offset mortgage interest. The Rhode Island mortgage credit is worth 20% of the mortgage interest you pay each year for the life of your loan.
Extra Assistance Program | RIHousing
One of the biggest hurdles to buying a home is the down payment. With the Extra Assistance program, paired with an RIHousing mortgage, Rhode Island first time homebuyers can qualify for 100% financing!
Extra Assistance offers up to $15,000 or 6% of the purchase price of your home. There aren’t any fees associated with the program. How does it work? You will receive an Extra Assistance loan which becomes a second mortgage on your home. The interest rate will usually be the same as for your primary mortgage.
To qualify for the first time homebuyers program, you must meet basic requirements:
- Meet RIHousing income and purchase price limits
- Buying a qualifying 1-4 family home or condo in RI
- Have a credit score of 620+
- Complete the homebuyer education class through RIHousing
- Use the home as your primary residence
- Get an RIHousing first mortgage through a participating lender
10kDPA | RIHousing
The 10kDPA is the newest of the first time homebuyer programs in Rhode Island. Launched in 2020, it offers up to $10,000 in down payment assistance for qualifying first-time buyers.
This program differs from the Extra Assistance program because the down payment assistance does not have interest or monthly payments. The grant only needs to be repaid when the home is no longer your primary residence, sold, or any portion of the title is vested to anyone else.
To qualify, you must meet these requirements:
- Be a first-time homebuyer
- Buy a 1-4 family home or condo in the state
- Meet RIHousing income and purchase price limits
- Complete the RIHousing homebuyer education class
- Occupy the home as your primary residence
- Obtain an RIHousing loan through an approved lender
First Time Homebuyer Loans in Rhode Island
There are nationwide mortgage programs and local loan programs designed specifically for first-time homebuyers. You can even qualify as a first time homebuyer in Rhode Island with bad credit, depending on the lender.
Mortgages for first-time buyers usually have less stringent requirements when it comes to the down payment and debt-to-income ratio. They may have income and purchase price limits, and the interest rate may be higher than you could get with a conventional loan that has stricter guidelines.
First Time Homebuyer Loan | RIHousing
Rhode Island Housing offers a first mortgage for first time homebuyers in Rhode Island. This popular program allows 100% financing when combined with down payment assistance.
To qualify, the purchase price must be no more than $492,201 for a condo or home. The income limit is $99,730 for a household with one or two people or $114,689 for a household with 3+ people.
First Time Buyer Loan | Pawtucket Credit Union
Get your home loan through Pawtucket Credit Union and you can qualify for their first time homebuyers mortgage. This program offers 100% financing on loans up to $510,400. Your loan will be a 30-year fixed-rate mortgage and require private mortgage insurance (PMI). The program requires a credit score of at least 700, but it may be a good option if you exceed the income or purchase price guidelines for an RIHousing loan.
Nationwide Mortgage Options for First-Time Buyers
The RIHousing first time homebuyer loan isn’t the only option you should explore – although it may be your best option considering the down payment assistance it can include! These nationwide loan options may be a good fit for you.
- FHA loan. This is the most popular first time homebuyer loan in Rhode Island. You need a down payment of just 3.5% but you will pay annual and upfront mortgage insurance premiums (MIP).
- USDA loan. If you are buying a home in Rhode Island in an eligible rural area (properties in cities like Providence do not qualify), you can get 100% financing with a low guarantee/funding fee and no mortgage insurance premiums!
- Conventional loan. This is a good option if you have very good credit and/or a down payment of 20% or more. These loans are not backed by the government and they can offer the best interest rates and flexible terms.
- Community Seconds (Fannie Mae) & Affordable Seconds (Freddie Mac) allow lenders to accept down payments as a second mortgage from a housing nonprofit or government program.
- Good Neighbor Next Door. This program allows teachers, law enforcement officers, firefighters, and EMTs to buy a home in a qualifying HUD home in a revitalization area for 50% off the list price and with a down payment as low as $100. The discount is a silent second mortgage that is forgiven if you remain in the home for at least three years. You do not need to be a first-time homebuyer, but you cannot have owned a home in the last 12 months.
First Time Homebuyer Programs in Providence County, RI
In addition to the programs above which are available statewide, there are city-specific programs to consider.
City of Providence | Down Payment Assistance
Are you living in or moving to Providence and buying a home? There are excellent first time homebuyer programs in Providence, RI that make homeownership more affordable!
Providence Housing & Community Development uses federal funding and assistance from local agencies and community organizations to provide several options for low-income, homeless, and first-time homebuyers in the city.
The Down Payment and Closing Cost Assistance program is administered by the Housing Network of Rhode Island. You can qualify for a deferred payment loan of up to $20,000 (based on need and household income). You must stay in the home for 5 or 10 years depending on the amount borrowed, otherwise the full amount must be repaid. You can see additional requirements here.
The HOME program offers funds to help low-income homebuyers buy a home. City of Providence HOME funds are offered as a 0% interest loan.
City of Cranston | Down Payment & Closing Cost Assistance
If you are moving to or living in Cranston, RI and ready to buy a home, you can qualify for one of two different first time homebuyer programs through the Department of Community Development. These programs cannot be used together.
- Closing cost assistance is a 5-year grant of up to $3,000 to use toward closing costs.
- Down payment assistance is a matching fund program that provides 50% of the down payment you need up to $5,000.
City of Woonsocket | First HOME Down Payment Assistance Program
If you are buying a home in Woonsocket, you can qualify for first time homebuyer down payment assistance of up to $7,500. The assistance comes in the form of a 0% interest loan that is partially forgiven and partially deferred. Half of the loan is forgiven after five years and the remainder is deferred and must be repaid when the home is sold or title is transferred.
FAQs for Rhode Island First Time Homebuyer Programs
What programs are available for first time homebuyers in Rhode Island?
Rhode Island first time homebuyers can qualify for several down payment assistance loans and a tax credit worth up to $2,000 per year. Several cities like Providence also offer first time homebuyer down payment and closing cost assistance.
Are first time homebuyer programs worth it?
Absolutely! While there may be some hoops to jump through, such as a homebuyer education course, you can qualify for 100% financing, down payment assistance, or a valuable tax credit that makes homeownership within reach AND more affordable.
Who is considered a first time homebuyer in Rhode Island?
You are a first-time homebuyer if you have not owned a primary residence in the last three years. You can also qualify if you only owned a home with a former spouse but you are now a single parent or a displaced homemaker.
Buying your first home is an exciting experience, especially when it’s made even easier with first time homebuyer programs in RI that get you there sooner. If you’re ready to embark on the homebuying process, Correira Brothers’ Moving & Storage will be here to help once moving day finally approaches!