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Millennials aren’t letting student loan debt stop them from becoming homebuyers, and many states have special programs that will help them realize their dreams.

An annual study by the National Association of Realtors shows that for the third year in a row, millennials (ages 35 and under) are buying more homes than Gen Xers (ages 36-50), baby boomers (51-69) or members of the “silent generation” (70-90).

Given that a Gallup survey revealed that nearly half of recent college grads with more than $25,000 in student loan debt had put off plans to buy a home, how are so many millennials managing to realize their dreams?

Student loans can elevate debt-to-income ratios

Student loan debt can not only make it harder to save for a down payment, but a recent Credible analysis shows how those monthly payments can increase your debt-to-income (DTI) ratio to levels that can disqualify you from taking out a mortgage.

One way to lower the DTI associated with your monthly student loan payments is to extend your loan term, either by enrolling in a government program or refinancing with a private lender.

Federal student loans are eligible for income-driven repayment plans that can stretch loan terms out to 20 or 25 years. Absent an interest rate reduction, stretching out your loan term can also increase the total interest you’ll pay over the life of your loans, however.

Many borrowers are able to lower the rates on their student loans by refinancing with a private lender. Multiple lenders compete to refinance student loans through the Credible marketplace.

Qualifying for a bigger mortgage with student loan debt

Borrowers who have used the Credible marketplace to refinance into a loan with a longer repayment term have obtained rate reductions averaging 1.36 percentage points, and reduced their student loan payments by $218 a month.

A borrower who can qualify for a $300,000 30-year fixed-rate mortgage at 3.3 percent interest rate would have monthly payments of $1,314 a month. By trimming $218 from their monthly student loan payment, the same borrower could take out a $350,000 mortgage with monthly payments of $1,532.

The average borrower refinancing saves $18K with Credible. Find out how much you can save in 2 minutes →

If you refinance federal student loan debt with a private lender, you may save thousands of dollars, but you’ll also lose some borrower benefits like loan forgiveness and access to income-driven repayment programs. Do your research.

Down payment assistance

After you’ve done what you can to make your student loans more manageable, you can start thinking about how much home you can afford — and how you’ll finance your purchase.

NAR’s research reveals that millennials are buying smaller, older and cheaper homes than their parents and grandparents. They’re making smaller down payments, sometimes with help from family or friends.

This is where programs offered by state housing finance agencies can help — particularly if you’re a first-time homebuyer. Some programs are even targeted specifically at student loan borrowers.

If you’ve got at least $25,000 in student loan debt and are looking for a home in select neighborhoods near Baltimore or Washington D.C., the Maryland Mortgage Program offers a discounted mortgage rate and up to $5,000 in down payment assistance when you purchase a home in a “sustainable community” (more details on Maryland’s “You’ve Earned It” program below).

Ohio’s “Grants for Grads” program provides down payment assistance and reduced-rate mortgage for first-time homebuyers who earned an associate’s, bachelor’s, master’s, doctorate or other postgraduate degree within the last four years.

Rhode Island’s Ocean State Grad Grant Program provides up to $7,000 in forgivable down payment assistance to qualified first-time homebuyers who graduated in the last three years.

Many other state housing finance agencies offer similar assistance to homebuyers, including:

  • Mortgages with low down payment requirements and flexible underwriting. Mortgages targeted at first-time homebuyers and buyers with low or moderate incomes are often available at below-market interest rates.
  • Down payment and closing cost assistance, often in the form of grants or forgivable second mortgage loans that you don’t have to pay back.
  • Mortgage Credit Certificates — dollar-for-dollar tax credits that can reduce your federal income tax bill by up to $2,000 a year.

Keep in mind that to take advantage of many down payment assistance programs, you’ll often have to pay a slightly higher interest rate on your first mortgage. But state housing finance agencies that finance loans by issuing tax-exempt bonds typically offer very competitive, if not below market, rates.

While many homebuyer assistance programs are targeted at first-time homebuyers, that doesn’t mean you’re automatically disqualified if you were once a homeowner. The definition of “first-time homebuyer” is typically anyone who hasn’t owned a home in the last three years.

Homebuyer assistance programs may also have income or home price limits. Down Payment Resource offers a handy tool that lets you see whether you — and the home you’re interested in — qualify for a homeowner assistance program. Down Payment Resource tracks about 2,300 assistance programs offered by housing finance agencies, and estimates that 87 percent of U.S. homes are eligible for some type of program.

List of programs offered by state housing finance agencies

Here’s a roundup of some of the best programs offered by state housing finance agencies:

Arizona Housing Finance Authority

The Arizona Housing Finance Authority (AzHFA) offers “HOME Plus” 30-year fixed-rate mortgages with down payment assistance grants equal to up to 5 percent of the mortgage amount. The program is not restricted to first-time homebuyers, but borrower income cannot exceed $89,088 and the home purchase price cannot exceed $356,352

In 17 targeted municipalities hit hard by foreclosures, the “Pathway to Purchase” (P2P) program provides down payment assistance equal to 10 percent of the purchase price (up to $20,000) in the form of a five-year forgivable loan. The P2P program is available in Arizona City, Avondale, Buckeye, Casa Grande, Coolidge, Douglas, El Mirage, Fort Mohave, Goodyear, Huachuca City, Laveen, Maricopa, Red Rock, Sierra Vista, Snowflake, Tucson, and Yuma.

Note that AzHFA stopped issuing Mortgage Credit Certificates in July, 2014.

California Housing Finance Agency

The California Housing Finance Agency’s “MyHome” assistance program provides down payment and closing cost assistance to first-time homebuyers in the form of a deferred-payment second mortgage equal to up to 5 percent of a home’s purchase price. CalHFA’s MyHome program is only available with CalHFA first mortgage loans.

CalHFA also partners with local counties to provide access to Mortgage Credit Certificates that may enable first-time homebuyers to convert a portion of their annual mortgage interest into a dollar-for-dollar tax credit on their federal income tax returns.

Florida Housing Finance Corp.

The Florida Housing Finance Corporation’s First Time Homebuyer Program offers low-interest rate mortgage loans and down payment and closing cost assistance in the form of second mortgage loans. Down payment assistance is only available when used in conjunction with a Florida Housing first mortgage.

The Florida Housing Mortgage Credit Certificate (MCC) program allows first-time homebuyers to claim up to 50 percent of mortgage interest paid each year as a tax credit on their federal tax return. Although the credit is capped at $2,000 a year, any remaining mortgage interest is still eligible for the federal home mortgage interest deduction.

Georgia Dream Homeownership Program

The Georgia Dream Homeownership Program provides first mortgage loans and down payment assistance to first-time homeowners (defined as those who have not purchased a home in the past three years) and buyers purchasing a home in targeted areas. Buyers who meet income and purchase price limits and invest at least $1,000 into the purchase transaction can receive $5,000 in down payment assistance.

Two other programs — Down Payment Assistance for Protectors, Educators and Health Care Workers (PEN), and Down Payment Assistance for Families with members who are disabled (CHOICE) — provide $7,500 in down payment assistance.

Illinois Housing Development Authority

The Illinois Housing Development Authority‘s @HomeIllinois First Time Buyer program offers $5,000 in down payment assistance, federal tax credit certificates, and lender-paid mortgage insurance to first-time homebuyers who contribute $1,000 or 1 percent of the purchase price whichever is greater. The 1STHomeIllinois program provides $7,500 in down payment assistance and 30-year fixed-rate mortgages with competitive rates to first-time homebuyers in 10 counties: Boone, Cook, DeKalb, Fulton, Kane, Marion, McHenry, St. Clair, Will and Winnebago.

Indiana Housing and Community Development Authority

The Indiana Housing and Community Development Authority’s Next Home program provides down-payment assistance of 3 or 4 percent in the form of zero percent loans that are forgiven after two years. NextHome with MCC lets first-time homebuyers claim a tax credit equal to 20-35 percent of their mortgage interest expense worth up to $2,000. Indiana’s Affordable Home program allows first-time homebuyers who bring their own down payment to qualify for an FHA loan at a below-market interest rate.

Maryland Department of Housing and Community Development

The Maryland Department of Housing and Community Development’s “You’ve Earned It” program allows homebuyers who have at least $25,000 in student loan debt qualify for $5,000 in down payment assistance in the form of a zero percent interest deferred loan when they buy a home in a “sustainable community.” Student loans may be in repayment or deferred status. The “You’ve Earned It program also provides a 0.25 percent discount on the standard Maryland Mortgage Program mortgage rate.

So what’s a sustainable community? These are “regions across the state where governments, business and communities coordinate investments to achieve sustainable growth, good jobs and thriving neighborhoods.” In other words, they’re likely to places that haven’t been growing, where good jobs are scarce, and where neighborhoods are not exactly thriving. But some of these communities are within commuting distance of job centers like Washington D.C., and the Maryland Department of Housing and Community Development has created an interactive online mapping tool that will help you identify eligible properties that might be hidden gems.

Maryland offers similar programs that aren’t restricted to student loan borrowers.

The Maryland Mortgage Program provides down payment assistance and partner match programs from employers, developers and community organizations in the form of zero-interest deferred loans, forgivable loans, or outright cash grants. Forgivable loans offered by employers, builders and developers, and community organizations, typically diminish over time. A five-year forgivable loan of $2,500 would drop by $500 a year for five years. So if you decided to move after 2 years, you’d have to pay back $1,500. If you stay put for 5 years, you would not have to pay it back at all. The Maryland Mortgage Program provides down payment assistance in the form of a 0 percent interest deferred loan of up to $5,000 that’s only repaid when you sell your house, or pay off or refinance your mortgage.

Massachusetts housing finance agency: MassHousing

The Massachusetts housing finance agency, MassHousing, offers a 30-year fixed rate mortgage that lets you put down as little as 3 percent on a home purchase without paying for mortgage insurance. “Buy Cities” mortgages with no down payment are available for homebuyers in Attleboro, Brockton, Fall River, New Bedford, North Quabbin, Quincy, Southbridge, Springfield, Taunton, and Worcester.

Michigan State Housing Development Authority

The Michigan State Housing Development Authority’s MI First Home loan program provides up to $7,500 down payment assistance in the form of 0 interest second mortgages with no monthly payments, that don’t have to be repaid until you sell your home or pay off or refinance your mortgage. Down payment assistance is available to first-time homebuyers and those purchasing in targeted areas. Borrowers must meet income requirements and contribute 1 percent of the sales price.

First-time homebuyers and buyers in targeted areas may also be eligible to claim a Mortgage Credit Certificate that lets them claim a federal income tax credit equal to 20 percent of the interest they pay on their mortgage. Maximum sales price for the MI First Home Loan and MCC programs is $224,500 statewide.

Missouri Housing Development Commission

The Missouri Housing Development Commission’s “First Place” loan program offers first-time homebuyers down payment assistance in the form of a grant equal to 4.5 percent of their first mortgage. First-time homebuyers who don’t need down payment or closing cost assistance can take advantage of a reduced interest rate loan. Missouri’s Mortgage Credit Certificate program provides first-time homebuyers with a federal tax credit equal to 25 percent of the total amount of mortgage interest they pay each year.

New Jersey Housing and Mortgage Finance Agency

The New Jersey Housing and Mortgage Finance Agency’s “Smart Start” second mortgage helps first-time homebuyers and those buying in “smart growth” cover down payment costs equal to up to 4 percent of their first mortgage with a 0 percent loan that’s forgivable after five years. New Jersey also offers a below-market, 30-year fixed-rate mortgage with down payments of as little as 3.5 percent to first-time homebuyers and buyers in select “urban target areas.”

State of New York Mortgage Agency: SONYMA

The State of New York Mortgage Agency (SONYMA) offers five mortgage programs for first-time homebuyers that combine flexible underwriting and competitive interest rates with low down payment requirements and down payment assistance.

SONYMA offers 0 percent interest down payment assistance loans of up to $15,000 that require no monthly payment and are forgiven after 10 years if you keep your SONYMA financing in place and continue to occupy your home. The trade off? Interest rates for first mortgages made in conjunction with a down payment assistance loan are o.375 percent higher.

North Carolina Housing Finance Agency

The North Carolina Housing Finance Agency’s N.C. Home Advantage Mortgage offers competitive interest rates and down payment assistance equal to up to 5 percent of the mortgage loan amount that’s forgiven after 15 years for first-time and move-up buyers. Down payment assistance is forgiven at 20 percent per year after you live in a home for 10 years. Buyers in Cabarrus, Cumberland, Guilford, Johnston and Mecklenburg counties may be eligible for up to $15,000 in down payment assistance.

North Carolina also offers Mortgage Credit Certificates that allow first-time homebuyers who meet income and sales price limits to claim a federal income tax credit equal to 30 percent of the interest paid on a mortgage taken out to purchase an existing home or 50 percent of the interest paid on a new home purchase (up to a $2,000 maximum).

Ohio Housing Finance Agency

The Ohio Housing Finance Agency’s “Grants for Grads” program provides discounted mortgage rates and down payment assistance of up to 5 percent of a home’s purchase price to recent graduates (those who have earned an associate’s, bachelor’s, master’s or doctorate degree within the last 48 months).

Down payment assistance is provided as a 0 percent interest second mortgage with no monthly payments that’s forgiven after five years. Forgiveness is phased in at 20 percent per year, so if you move out of state after three years, you must pay back 40 percent of the loan.

OHFA’s First-Time Homebuyer Program offers similar benefits to a broader range of buyers, although borrowers taking advantage of down payment assistance must wait 7 years before their second mortgage is forgiven.

Pennsylvania Housing Finance Agency

The Pennsylvania Housing Finance Agency provides up to $6,000 in down payment assistance in the form of a 0 percent interest second mortgage, with monthly payments spread out over 10 years. The Keystone Advantage Assistance second loan can be used in conjunction with several PHFA first loan programs. PHFA also provides Mortgage Credit Certificates allowing eligible homebuyers to claim a dollar-for-dollar federal income tax credit equal to 50 percent of the mortgage interest paid per year, capped at $2,000 annually.

Rhode Island Housing

Rhode Island Housing’s Ocean State Grad Grant program provides graduates who have earned their degrees in the last 36 months with up to $7,000 in forgivable down payment assistance, which can be combined with other closing cost assistance programs. The down payment assistance grant is forgiven after five years, if you’re still in the home and using it as your primary residence.

Household income limits are $89,280 for a one- or two-person household, or $104,160 for households of three or more. The maximum first mortgage amount allowed is $417,000.

Rhode Island Housing also offers a FirstHomes100 mortgage to first-time homebuyers with options that include down payment and closing cost assistance and a waiver of mortgage insurance for qualified borrowers. Closing cost assistance includes low-interest loans that can be paid back over a period of up to 15 years. Many first-time homebuyers may also qualify for the FirstHomes Tax Credit that can save them up to $2,000 a year on their federal income taxes.

Tennessee Housing Development Agency

The Tennessee Housing Development Agency provides down payment assistance in the form of a 0 percent interest second mortgage that’s forgiven after 15 years. The Great Choice Plus second mortgage — only available with THDA’s Great Choice first mortgage — requires no monthly payments, and is forgiven at the rate of 20 percent a year in years 11 through 15 if you remain as owner occupant of your home. First-time homebuyer restrictions on THDA mortgages have been removed in 50 counties and neighborhoods across Tennessee.

Texas State Affordable Housing Corp.

The Texas State Affordable Housing Corporation provides down payment assistance equal to up to 5 percent of the purchase mortgage. The down payment assistance is a gift that does not have to be repaid, regardless of how long you ive in the home, and you do not need to be a first-time homebuyers. The “Home Sweet Texas Home Loan” is available to low- and moderate-income homebuyers, and the “Homes for Texas Heroes” program serves teachers, firefighters, police and correctional officers, and veterans.

TSAHC offers Mortgage Credit Certificates to first-time homebuyers that provides a federal income tax credit worth up to $2,000 a year. The MCC program is available to teachers, firefighters, peace officers, veterans, and low- and moderate-income first-time homebuyers.

Virginia Housing Development Authority

The Virginia Housing Development Authority provides down payment and closing cost assistance to first-time homebuyers in the form of grants equal to up to 3.5 percent of a home’s sales price, and FHA Plus Loans, second mortgages of up to 5 percent of a home’s sales price.

Down payment assistance grants, which are available to first-time homebuyers who meet program income limits, do not have to be repaid. Borrowers taking out FHA Plus Loans to cover down payment and closing costs will pay slightly higher rates on their VHDA-financed first mortgage, and must bring cash equal to 1 percent of the sales price to the closing table.

VHDA loans are available to first-time homebuyers (those who have not owned a home in the last three years) and those purchasing homes in designated target areas.

First-time home buyers may also be eligible for a VHDA Mortgage Credit Certificate, a dollar-for-dollar federal income tax credit equal to 20 percent of the borrowers annual mortgage interest payments.

Washington State Housing Finance Commission

The Washington State Housing Finance Commission provides down payment assistance equal to up to 4 percent of the first mortgage amount, in the form of a 0 percent interest Home Advantage deferred second mortgage that doesn’t have to be repaid until the house is sold or the first mortgage is refinanced or paid off. The Home Advantage program is open to buyers who meet program income limits, not just first-time homebuyers. Home Advantage may also be eligible to claim WSHFC’s Mortgage Credit Certificate, a tax credit on a portion of mortgage interest paid.

First-time homebuyers or those buying in targeted areas may qualify for lower rates on a House Key Opportunity first mortgage with second mortgage for downpayment assistance. Borrowers taking out House Key Opportunity mortgages — which are funded with tax-exempt mortgage revenue bonds — cannot claim the Mortgage Credit Certificate.

Wisconsin Housing and Economic Development Authority

The Wisconsin Housing and Economic Development Authority provides down payment and closing cost assistance in the form of a 10-year fixed-rate second mortgage. You don’t have to be a first-time homebuyer to be eligible for an Easy Close Advantage second mortgage, but you must use it in conjunction with a WHEDA Advantage first mortgage. WHEDA also offers a tax credit to qualified borrowers equal to up to 40 percent of their annual mortgage interest payments.

Refinancing your student loans at a lower rate could save you thousands of dollars and may help you qualify for a mortgage. It only takes about two minutes to see what you might save with one of Credible’s multiple, vetted lenders — without sharing your personal information with lenders or affecting your credit score.