First-Time Home Buyer Programs in Wisconsin

FHA Loans

USDA Loans

• Pros:
• Low-interest loans with no down payments available to those who qualify.
• A credit score as low as 620 usually secures the best rates.
• Cons:
• You can't make more than 115% of the median income in the designated area you want to live in.
• Eligibility:
• Consider a single-family home in a USDA designated area, and not have household income of more than 115% of the median income for that zone.
• Best For:
• Low-to-moderate income homebuyers who want to live in parts of rural or suburban Wisconsin.

Wisconsin's vast expanse encompasses idyllic rural communities, offering an enticing opportunity for those seeking a tranquil lifestyle. With the assistance of a low-interest USDA loan and no down payment requirement, you can seize the chance to reside in these serene locales. These loans, backed by the United States Department of Agriculture, aim to facilitate the relocation of low- to moderate-income individuals to designated rural areas. Interestingly, many suburban regions adjacent to bustling metropolitan centers also fall within the USDA's purview. Numerous counties in Wisconsin are designated as rural zones by the USDA.

A USDA loan enables you to purchase a single-family home for primary residency in these areas. However, to qualify, your income must not exceed 115% of the median income in your desired zone.

Despite being federally backed, most USDA loans are administered by local lenders. Consequently, qualification requirements tend to be less stringent. A FICO credit score of 620 is generally sufficient to secure a reasonable interest rate without the need for a down payment. However, to avail yourself of these favorable terms, you will be required to pay insurance premiums. Typically, these premiums include a 1% upfront charge followed by 0.35% fees throughout the year. Additionally, like any mortgage, closing costs apply, typically ranging from 3% to 6% of the loan value but not exceeding 6%.

If the allure of the countryside beckons, exploring this first-time homebuyer program in Wisconsin is a must-do.

VA Loans

• Pros:
• Lower interest rates than conventional loans
• Zero down payment loans available for those who qualify
• No PMI requirement
• Cons:
• VA funding fee
• Long appraisal process
• Eligibility:
• Most veterans and current service members qualify
• Best For:
• Veterans or current service members who have satisfactory credit and low-to-moderate income

The Department of Veterans Affairs (VA) created the VA loan program to honor those who served in defense of the American dream. While the department backs these loans, they are issued by various mortgage lenders across Wisconsin.

To qualify for a VA loan, you must meet one of the following criteria:

Be a U.S. military veteran with a minimum of 90 to 181 days of continuous service (the requirement varies based on times of service) or an active-duty service member with at least 90 days of continuous service.

Be a National Guard or Reserve member who has served for at least six years, or be an honorably discharged member.

Be an un-remarried surviving spouse of a veteran or service member killed in the line of duty or from a service-related incident.

VA loans typically come with low-interest rates, and you may secure one with no down payment if you have a good credit score and meet other qualifications. Additionally, the VA imposes limits on how much lenders can charge in closing costs.

However, it's important to note that VA loans come with a VA funding fee, which can range from around 1.4% to 3.6%, depending on various factors such as your military service history and whether you've had a VA loan before.

Good Neighbor Next Door Program

• Pros:
• Flat 50% discount off the listing price of a home in a revitalization area
• Allowed to sell the home after three years
• Cons:
• Competitive selection process
• Must live in your home as the primary residence for at least three years
• Eligibility:
• Qualification open to K-12 teachers, EMTs, police officers, and firefighters
• Best For:
• Eligible public servants with low-to-moderate income

Communities rely heavily on the dedicated service of teachers, police officers, firefighters, and EMTs. However, some neighborhoods face a shortage of these essential professionals as permanent residents. In response, the U.S. Department of Housing and Urban Development (HUD) initiated the Good Neighbor Next Door Program to address this issue.

This program offers first-time homebuyers in Wisconsin a significant incentive—a 50% discount off the listing price of a home located in a designated "revitalization" area. These areas aim to attract vital community members and bolster neighborhood stability. Wisconsin boasts several of these revitalization zones.

To participate, prospective buyers must undergo a pre-approval process facilitated by a Good Neighbor Next Door agent, who assists in locating suitable listings. However, competition for listed homes in the program can be fierce, with properties often available for only a brief period. Selection is determined through a random lottery system. Rest assured, if you miss out on a bid, your agent will continue to assist you in finding a suitable listing.

If you successfully secure the discount, you must commit to residing in the purchased home as the primary resident for a minimum of three years. After this period, you are free to sell the property.

It's important to note that the Good Neighbor Next Door Program does not provide a mortgage but rather offers a substantial discount on the home's purchase price. Any remaining balance can be covered through various mortgage options, including USDA, VA, FHA loans, or other eligible financing avenues.

Fannie Mae/Freddie Mac

• Pros:
• Several options available, including some that don’t require a credit history
• Flexible repayment terms
• Option for cancellable private mortgage insurance (PMI)
• Closing costs can be covered from multiple sources
• Cons:
• Some options require moderate credit scores
• Eligibility:
• Income limits apply for homes in some areas, although this requirement is waived for property in targeted areas
• Best For:
• Low-to-moderate income individuals who are unable to secure a mortgage elsewhere

For those facing difficulties securing a mortgage elsewhere, Fannie Mae or Freddie Mac could provide a solution. These entities, established by the federal government, are dedicated to making homeownership achievable for low-income individuals. If your income and credit situation pose challenges in obtaining a mortgage, exploring Fannie Mae and Freddie Mac as first-time homebuyer programs in Wisconsin is advisable.

Freddie Mac's HomePossible program, for instance, does not require a credit history. Collaborating with local lenders, Freddie Mac offers low-interest loans with a down payment ranging from 3% to 5%. While mortgage insurance is necessary, you have the option to cancel it once your loan balance drops below 80% of its appraised value. Additionally, unlike many mortgages, you can utilize funds from family or employer-assistance programs to cover down payments.

Among Freddie Mac's popular options is the 97 LTV loan, requiring only a 3% down payment. Borrowers can also opt for a fixed-rate mortgage spanning 15 to 30 years or choose from various adjustable-rate mortgages (ARMs).

Qualification criteria typically include income limitations, which vary based on location. Nevertheless, lenders may waive these limits if you're purchasing property in "underserved" areas.

Similarly, Fannie Mae offers comparable loans through its HomeReady Program. However, a FICO credit score of at least 620 is required to secure a loan with a down payment as low as 3%.

Native American Direct Loan Program (NADL)

• Pros:
• Low closing costs and credit score requirements
• Small funding fee
• Cons:
• Limited to a small group of borrowers
• Eligibility:
• You must be a service member or veteran who also is one of the following:
• A Native American enrolled in an American Indian tribe or Alaskan Native village, or a tribe that holds an MOU with the VA
• A Pacific Islander or Native Hawaiian
• The spouse of an eligible person
• Best For:
• Native American service members and veterans with low to moderate income

If you are a Native American who has served in the United States military or a non-Native American veteran married to a Native American, the VA offers assistance in financing a home through the Native American Direct Loan Program (NADAL). This program sponsors mortgages with low interest rates and lenient credit history requirements.

However, it is essential to note that these loans must be used to finance a home on Federal Trust Land, Alaska Native Corporation, and other specific locations designated by the VA.

Similar to traditional VA loan requirements, borrowers can obtain these loans with a zero down payment, and the VA does not require private mortgage insurance (PMI).

Wisconsin Housing and Economic Development Authority (WHEDA)

• Pros:
• Low-interest mortgages
• Down payment assistance
• Cons:
• Need good credit
• Strict income limits
• Eligibility:
• Meet income, house size, and credit requirements set by lenders
• Best For:
• Wisconsin residents with little-to-moderate income

The Wisconsin Housing and Economic Development Authority (WHEDA) operates as the state's housing finance entity, collaborating with private lenders statewide to offer mortgages with below-average Wisconsin rates.

• WHEDA manages down payment assistance programs and an essential online first-time homebuyer education course, mandatory for loan qualification, aimed at equipping you with necessary knowledge.
• Income limits and other requirements vary based on the WHEDA loan type.
• After completing the course, you can connect with a WHEDA-registered lender for various mortgage options.

WHEDA provides:

• First-Time Home Buyer Advantage (FTHB) home loan, offering low-interest rates for first-time homebuyers, veterans, and those targeting federally designated areas.Requirements include a good FICO credit score (usually at least 620), meeting income limits (varies by county), and purchasing a single-family home (duplex requires landlord counseling).
• FHA Advantage loan, with less stringent requirements, even for non-first-time homebuyers in Wisconsin, typically requiring a minimum credit score of 620. This 30-year-fixed-rate mortgage applies to single-family homes, with combined income limits varying by county.
• Veterans Affordable Loan Opportunity Rate (VALOR) loan, a 30-year-fixed-rate mortgage offering rates lower than WHEDA Advantage loans for eligible veterans who meet WHEDA Advantage loan requirements.

While WHEDA loans may have stricter requirements compared to federally sponsored first-time homebuyer programs, they offer additional benefits to qualifying individuals.