Tips for First-Time Homebuyers in the Fargo-Moorhead Area

Oodalolly do we love working with first-time home-buyers!  There is an energy that comes from that first search, first showing, first offer, and first set of keys that is unmatched.  Whether the first home is a new build or a condo downtown, here is a short list of tips for our first-time home buying clients:

1. Understand the USDA Loan Program

For first-time homebuyers in rural or suburban areas like Fargo-Moorhead, the U.S. Department of Agriculture (USDA) loan program is a valuable resource. USDA loans are designed to help low- to moderate-income buyers purchase homes with little to no money down. One of the key advantages of USDA loans is that they offer 100% financing, meaning you don't need to come up with a large down payment. This can be particularly helpful for those who may not have significant savings for a traditional down payment.

In the Fargo-Moorhead area, certain neighborhoods qualify for USDA loans because of their rural classification, making this program an excellent option for many residents.

Key Benefits of USDA Loans:

• No down payment required.
• Lower mortgage insurance rates compared to FHA loans.
• Flexible credit requirements, with some lenders allowing scores as low as 620.
• Competitive interest rates.

2. Explore First-Time Homebuyer Loan Programs in North Dakota and Minnesota

Both North Dakota and Minnesota offer various first-time homebuyer loan programs to help reduce the financial barriers of purchasing a home. These programs can provide down payment assistance, competitive interest rates, and other perks that make buying your first home more affordable.

North Dakota Housing Finance Agency (NDHFA)

The NDHFA offers several programs specifically for first-time homebuyers:

• FirstHome Program: This program offers a low-interest mortgage for first-time buyers or buyers who have not owned a home in the past three years. The program also provides down payment assistance to qualified borrowers.
• Mortgage Credit Certificate (MCC): This program allows buyers to claim a federal income tax credit, which reduces the amount of tax they owe, making homeownership more affordable in the long run.

Minnesota Housing Finance Agency (MHFA)

Minnesota also has several options for first-time homebuyers:

• Start Up Loan Program: This program offers competitive interest rates and down payment assistance for first-time buyers, as well as for repeat buyers purchasing a home in an underserved area.
• Mortgage Credit Certificate (MCC): Like the program in North Dakota, Minnesota’s MCC program allows first-time homebuyers to claim a federal tax credit, which can be up to $2,000 per year, based on the mortgage interest paid.
• Deferred Payment Loans (DPL): The state also offers deferred payment loans to help with down payment and closing costs, which can be particularly useful for first-time buyers who may need extra help with upfront expenses.

3. Consider Local Programs and Grants

Many local programs and grants exist to support homebuyers in the Fargo-Moorhead area. These programs are often aimed at specific populations, such as first-time buyers, veterans, or those purchasing homes in certain neighborhoods.

Fargo-Moorhead Down Payment Assistance Programs

Both Fargo and Moorhead have local down payment assistance programs available to first-time homebuyers. These programs are often designed to make homeownership more attainable for individuals and families who may not have saved enough for a large down payment. Assistance can vary in terms of amounts and qualifications, so it’s important to contact local housing authorities for the most up-to-date information.

4. Review Your Credit and Financial Health

Before applying for any loan, including USDA or first-time homebuyer programs, it's essential to review your credit and financial situation. Lenders will look at your credit score, debt-to-income ratio, and overall financial stability when determining loan eligibility.

• Credit Score: USDA loans typically require a credit score of 640 or higher, though some lenders may accept lower scores. Many first-time homebuyer programs also have flexible credit requirements.
• Debt-to-Income Ratio (DTI): Lenders generally prefer a DTI of 43% or lower, meaning that no more than 43% of your income should go toward paying debts, including your new mortgage.

5. Work with a Local Real Estate Agent and Lender

When navigating the homebuying process, it’s a good idea to work with professionals who are familiar with the Fargo-Moorhead area. A local real estate agent can help you find homes that fit your budget and needs while navigating any local zoning or property requirements. Similarly, a local lender who understands the specific first-time homebuyer loan programs available in North Dakota and Minnesota can guide you through the application process and ensure you take full advantage of any financial assistance opportunities.

6. Attend First-Time Homebuyer Seminars

Hit the message button to ask about our next First-Time Home Buyers session, or to schedule a one-on-one with Christopher or Darin! Attending these seminars can help you become educated and feel more confident in getting started with your homebuying journey.

7. Be Aware of Home-Buying and Closing Costs

One of the reasons for an initial sit-down with us, or attending a first-time home-buyers session, is to talk about some of the costs associated with the home-searching process.  In addition to your down payment, people often overlook  other costs that can come with the territory . These costs can include:
Title insurance
Inspections
Property taxes
Lender fees. 

It's important to budget for these expenses, as they can amount to 3-5% of the home’s purchase price. We often work with sellers to negotiate the terms of these costs, and some first-time homebuyer programs offer assistance with closing costs, so check with your lender about these options.  

Conclusion

Buying your first home in the Fargo-Moorhead area is an exciting step, and there are many resources available to help make the process more affordable and accessible. By taking advantage of USDA loans, first-time homebuyer programs, and local assistance, you can set yourself up for success in purchasing a home in this vibrant region. Give us a call, text or PM and we’ll get you hooked up with our preferred lender, review your finances, and explore all the options available to ensure you make the best decision for your future. Let’s get house hunting!