Definition
State housing agencies issue tax-exempt bonds using proceeds to fund mortgages for first-time homebuyers at below-market rates. Because bond investors accept lower returns due to tax benefits, homebuyers get significantly lower rates. These programs are highly competitive.
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HFAs issue tax-exempt bonds using proceeds to fund mortgages for first-time homebuyers at below-market rates. Because bond interest is federally tax-exempt, bond investors accept lower returns, allowing HFAs to offer lower mortgage rates. Bond program mortgages require borrower eligibility (first-time buyer status, income limits, etc.) and property price limits. Bond programs are a primary mechanism for HFAs to expand affordable homeownership. Different programs have different rates, terms, and assistance levels.
Pro Tip
Bond programs are highly competitive and can have long wait lists; apply early and work with approved lenders to access these benefits.
Example
Your state's HFA issues bonds funding mortgages at 4.25% for first-time buyers within income limits, compared to 5.5% market rates.