All fifty states and many cities have housing agencies with programs designed to help first-time home buyers purchase a home. Typically, state agencies sell bonds to raise funds for their loan programs, which offer below-market interest rates.

The basics of state housing programs are:

• Income limits and maximum house prices track federal U.S. Office of Housing and Urban Development (HUD) guidelines and vary from county-to-county.
• There is 100 percent financing available.
• Gift funds for down payment or closing costs are allowed.
• Special incentives sometimes target special areas within a county or city. S
• tate housing can be used with FHA or VA programs for nodown- payment financing.
• First-time home buyers are defined as not having owned a home in the last three years.
• The home must be owner occupied; you can’t use it as a rental.

In addition to state housing programs, some cities offer their own firsttime home buyer programs tied to HUD grants. If you’re interested in living in one of the targeted areas, the incentives can be enticing.

For example, a city may offer a $4,000 grant to first-time home buyers who buy in certain areas that need rejuvenation. If the buyers stay in the home for five years, the loan is forgiven. Also, there are special incentives to entice police officers or teachers to buy in these areas.