Sooners buying homes will still find relative bargains but will be saddled with more expense than the year before.
The median sale price of an Oklahoma home rose 15% year-over-year, to $242,400, as of May 2022, according to Redfin. This marked a rise in price of almost $30,000 in a year.
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While those numbers might sound intimidating, there is hope for first-time homebuyers in the form of down payment assistance and mortgage rate reductions.
Who Is Considered a First-Time Homebuyer in Oklahoma?
A first-time homebuyer is, of course, anyone who has never owned a home, but it is also anyone who has not had an ownership interest in a primary residence over the past three years, the Oklahoma Housing Finance Agency (OHFA) says.
This mirrors the definition of first-time homebuyer established by the U.S. Department of Housing and Urban Development (HUD).
To qualify for Oklahoma Housing’s homebuyer assistance plans, either you or your spouse will have to qualify as a first-time homebuyer unless you intend to purchase a home in a targeted area.
Recommended: Step-by-Step First-Time Home Buyer Guide
4 Oklahoma Programs for First-Time Homebuyers
Both the Oklahoma Housing Finance Agency and Rural Enterprises of Oklahoma offer homebuyer assistance to individuals with low to middle incomes, first-time buyers, and those employed in jobs that serve the community.
Here’s a rundown of the programs. But first, anyone interested in OHFA help can use this quick eligibility tool.
1. Down Payment Assistance Gold Loan
To qualify, you’ll need to apply directly through an OHFA-approved mortgage lender and meet the income limits by area and loan type. Also:
Minimum FICO credit score: 640-680
Maximum debt-to-income (DTI) ratio: 45%
The grant is subject to a recapture tax of up to 50% of your benefit if you sell your home within the first nine years of purchasing it.
2. Down Payment Assistance Dream Loan
For those taking out a government-backed mortgage, the maximum income statewide is $150,000, no matter the household size. For conventional loan borrowers, the income limit depends on the county.
Borrowers will be subject to a recapture tax if their home is sold within the first nine years of purchase.
Minimum credit score: 640-680
Maximum DTI: 45%
3. OHFA Special Interest Rate Discount
To be eligible for an interest rate discount, you must fall under one of the following OHFA employment categories:
- OHFA Shield: Eligible borrowers employed as firefighters, law enforcement officers, EMTs, and paramedics.
- OHFA 4Teachers: Eligible borrowers who hold a current Oklahoma teaching certificate and have an active contract with an accredited Oklahoma public or private school.
- State Employee: Eligible borrowers currently employed by an Oklahoma state agency.
Minimum credit score: 640
Maximum DTI: 45-50%
4. REI Gift 100 Program
Depending on what type of mortgage loan you choose, the assistance can come in the form of a gift or a forgivable seven-year second mortgage. The amount of assistance offered can range from 3.5% to 5% of your total loan amount. Funds can be applied toward a borrower’s down payment, closing costs, or any other mortgage-related expenses.
Minimum credit score: 640
Maximum DTI: 45%
How to Apply to Oklahoma Programs for First-Time Homebuyers
To qualify for Oklahoma’s first-time homebuyer assistance, you’ll need to meet the prescribed income, credit, and DTI ratio requirements, which vary by program.
OHFA Gold and Dream Loans
The lender will determine whether you qualify, and also may request documentation to confirm eligibility for an interest rate discount through the OHFA Shield, OHFA 4Teachers, or State Employee programs.
REI Gift 100 Program
When you’re ready to proceed with your mortgage application, you can get pre-approved by the lender for a mortgage and the down payment/closing cost assistance.
Recommended: How to Afford a Down Payment on Your First Home
Federal Programs for First-Time Homebuyers
Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, like state programs, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.
The mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.
Federal Housing Administration (FHA) Loans
Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.
FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years. You can learn more about FHA loans in general and FHA lending limits by area.
Freddie Mac Home Possible Mortgages
The Home Possible mortgage is for buyers who have a credit score of at least 660.
Once you pay 20% of your loan, the Home Possible mortgage insurance will be canceled, which will lower your mortgage payments.
Fannie Mae HomeReady Mortgages
For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site.
Fannie Mae Standard 97 LTV Loan
Department of Veterans Affairs (VA) Loans
Native American Veteran Direct Loans (NADLs)
U.S. Department of Agriculture (USDA) Loans
The USDA also directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA website.
HUD Good Neighbor Next Door Program
Oklahoma First-Time Homebuyer Stats for 2022
Here are some homebuyer statistics for the four key metropolitan statistical areas tracked by the U.S. Census Bureau’s latest community survey.
Additional statewide housing stats from the Census Bureau:
- 66.1% of Oklahoma’s housing units were owner-occupied as of 2021
- Median gross rent in 2021 was $818 per month
- Median monthly housing cost for owners with a mortgage was $1,246
Additional Financing Tips for First-Time Homebuyers
In addition to federal and state government-sponsored lending programs, while you’re crunching the numbers on projected mortgage payments, you might want to hone your knowledge about other financial strategies that may help you become a homeowner. Some examples:
- Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.
- Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.
- 401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.
- State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.
- The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.
- Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.
- Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.
First-time homebuyers of low and moderate means in Oklahoma can try to lasso mortgage and down payment assistance programs that can make buying a home more affordable. Other first-time buyers can look for a good fit among mortgages on their own.
Should I take first-time homebuyer classes?
Do first-time homebuyers with bad credit qualify for homeownership assistance?
Is there a first-time homebuyer tax credit in Oklahoma?
Is there a first-time veteran homebuyer assistance program in Oklahoma?
Other veterans can look into the federal VA loans described above.
What credit score do I need for first-time homebuyer assistance in Oklahoma?
What is the average age of first-time homebuyers in Oklahoma?
That’s a bit older than the national median of 33, according to the latest Profile of Home Buyers and Sellers published by the National Association of Realtors.
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