Susan at +amateur christian+ has some advice for first-time homebuyers — spend some time to search for grants, and you might be able to get into a home without spending a fortune.

Two years ago I closed escrow on my very first home purchase. I did it with almost no money of my own, thanks to some free money programs I qualified for. Some friends have been showing interest in doing the same thing, so I thought I’d share my story with others.

The Home$tart program pretty much financed my downpayment. It’s a Federal program funded thru the Federal Home Loan Bank of Seattle. It is a grant — in other words, free money. They matched $3 for every dollar I had in savings up to a total grant of $5,000. I somehow managed to scrape together $1666, and they gave me $5000.

They have a set amount of grants available each year. You can enroll now — they give you an entire year to find and buy a house. If you’re in Portland, for example, you will need to apply thru the Albina Community Bank. (If they are out of grants by the time you start looking, you may want to wait until the beginning of the following year.) Your combined income must be below a certain percentage of the local median (80% in Portland), and you must attend a one-day class on homebuying and homeownership.

My closing costs and my super low interest rate were covered by the Oregon State Bond program. Basically if you’re again in that same income bracket, they’ll give you a below market rate (currently 5.25%) which saves you money and means you can buy more house than you could afford otherwise, or you can pay a slightly higher (yet still below market) rate (5.9%) and they will give you the equivalent of up to 4% of your loan amount to cover your closing costs. I found a cute little bungalow (a 1922 kit house) for $139,000 and they gave me the $4,073.07 I needed to pay for all the points, fees, appraisals, etc. that it takes to buy a mortgage.

All told, I got a lower rate than anybody else could get and $9,073.07 of free money. Woot!

Home$tart is a program provided by the Federal Home Loan Banks, “an essential source of stable, low-cost funds to financial institutions for home mortgage, small business, rural and agricultural loans. With their members, the FHLBanks represent the largest source of home mortgage and community credit.” For more information, or for a list of participating institutions near you, visit their web site.

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