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Policy Library

Boost First-Time Home Buyers With Affordable Loans

For too many, homeownership presents a double bind: it’s an aspiration that can create added stability and civic engagement, but borrowing too much can crush aspirations and destabilize an entire life. Several states are helping first-time home buyers with cost-effective revolving loan funds that provide what’s needed to make life-changing first home purchases. The First-Time Home Buyers Act helps more families afford a first home without significant cost to the state or encouraging home-buyers to take on more debt than they can handle.

The National Landscape

Passed in:

Alaska, Florida, Idaho, Maryland, Michigan, Mississippi, New Hampshire, New Jersey, New Mexico, Pennsylvania, Rhode Island, South Dakota, Texas, West Virginia
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In The News

“Large numbers of first-time home buyers have been turning to North Dakota Housing Finance Agency for financing help, setting spring records… If our purchase activity is indicative of more households becoming homeowners, that is a good thing for North Dakota because homeowners are more invested in their community.”
“In 2017 alone, state HFAs provided $28 billion to finance affordable homeownership for more than 152,000 households, 26 percent of which were minority-headed households… A 2018 study found that state HFA loans were much less likely to experience defaults or foreclosures than loans from other sources to similar borrowers.”
“There are two roadblocks that most would-be buyers think they face. The first obstacle is down payment accumulation. The second is purely psychological: the fear that they cannot qualify for a loan.”


  • Housing advocates
  • Home sellers
  • First-time home buyers


  • Traditional lenders, potentially even if they are denying loans to the recipients of this program
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Who does this help?
Potential first-time home buyers who are close to being able to purchase a home, but have trouble accessing credit from traditional, for-profit lenders. More broadly increased home ownership has been shown to improve civic participation and community engagement, as well as health and economic outlook.
Why would the state get into the business of helping first-time home buyers?
A state fund for home buyers helps more families afford homes without taking on crushing debt.
Is this high cost to the state?
No, this policy is a positive long-term investment. The initial investment to fund a revolving loan fund will be paid back to the state with interest since most loans are fully repaid.

Model Policy

This act shall be known as the First-Time Home Buyers Act.

To establish a revolving loan fund to assist first time buyers in financing a home purchase


(a) The STATE Department of Housing [or comparable state entity] shall administer a home buyer assistance program that:
  • (i) assists home buyers to receive low-interest mortgage loans, with down payment and closing cost assistance options, for the purchase of homes; and
  • (ii) coordinates with, and matches where appropriate, similar programs offered by private employers and county and municipal governments so as to maximize the total amount that home buyers can receive under the program; and
  • (iii) establishes a revolving loan fund that shall consist of funds appropriated by the Legislature, money received from the repayment of loans made from the program, and interest earned.

(b) Loan use and requirements
  • (i) With reference to loans under this program, the DEPARTMENT shall:
  • (1) allow home buyers to utilize the loans for the purchase of newly constructed or existing homes, including homes held in cooperative or condominium forms of ownership;
  • (2) require that borrowers under this program do not own other residential real estate at the time of the issuance of the loan;
  • (3) require a home purchased under this program to be occupied by the home buyer as a principal residence.

(c) Capitalization of revolving loan funds
  • (i) Any proceeds or repayments from loans made under this paragraph shall be returned to the revolving loan fund established under this paragraph to be used for purposes related to this section.

(d) Regulations
  • (i) The DEPARTMENT shall adopt regulations to implement the program established under this section.