First-time Homebuyers Program in Newfoundland

Becoming a homeowner for the first time is a significant milestone, and the First-time Homebuyers Program (FHP) for 2023 is here to help turn that dream into a reality. Designed to assist first-time homebuyers throughout the province, the FHP offers a combination of grants and loans to ease the financial burden associated with buying a new or existing home. In this article, we'll explore the eligibility requirements, income limits, sliding scale of assistance, flexibility regarding maximum purchase prices, interest rates, and additional key details that make the FHP a valuable resource for those seeking to embark on their homeownership journey.

Eligibility Requirements:

The FHP is designed to assist first-time homebuyers from across the province who meet its specific requirements and have secured pre-approval for a mortgage from a recognized financial institution.
Approximately 150 applicants will be supported through this program.
Qualified households will receive a grant covering 50% of their legal closing costs, up to a maximum of $1,500. In addition, they will be eligible for a repayable loan, which can go up to five percent of the purchase price of a new or existing home, with the maximum purchase price varying by region: $350,000 in St. John’s (Census Metropolitan Area) and Labrador, $300,000 in regional centers (Clarenville, Gander, Grand Falls-Windsor, Corner Brook, Stephenville, and communities within a 30 km radius), and $250,000 in the rest of the province (Rural). The loan amount is determined based on a sliding scale that considers the applicant's household income and the home's cost.

Income Limits:

To qualify for the full loan, applicants must have a total household income of less than $85,000.
Households with total incomes up to $95,000 are eligible for assistance on a sliding scale.

Amount of Assistance:

Grants will cover 50% of the legal closing costs associated with the property purchase, up to a maximum of $1,500.
The loan amounts depend on the maximum purchase prices set by the program:

$350,000 in St. John’s and Labrador
$300,000 in regional centers
$250,000 in the rest of Newfoundland and Labrador (Rural)

For instance, in high-cost regions like St. John’s and Labrador, households with a $85,000 income may receive a maximum of $19,000 in assistance (a $17,500 loan and a $1,500 grant). Meanwhile, those with a $95,000 income in the same region may receive up to $14,000 in assistance (a $12,500 loan and a $1,500 grant).
Homebuyers with incomes between $85,000 and $95,000 are also eligible, but their loan amounts decrease on a sliding scale.

Flexibility with Maximum Purchase Price:
The FHP includes a Variance Policy that, upon approval, permits the purchase of homes at prices up to ten percent above the established maximums in St. John’s CMA, Labrador, and regional centers. However, assistance for clients who purchase homes within the Variance Policy is capped at 5% of the maximum purchase price for their region.
Interest Rates for First-Time Homebuyers:
Interest rates may vary, depending on when the client decides to start repaying the down payment loan. However, they will not exceed the prime lending rate minus one percent.
Additional Information on FHP Loans:
Successful applicants are not required to begin repaying the loan until five years after purchasing their home. Clients can opt to start repaying the loan earlier if they have the financial means.
The program is not available for homes that have already been purchased.
Applications submitted with a purchase and sale agreement in place must allow for a processing period of 10 business days before closing to assess and process the request.
Choice of Lender:
Homebuyers can select their own lender, provided that the lender is an accredited institution offering competitive mortgage interest rates and is willing to accept the down payment loan as an eligible source for the down payment.
Practical Examples of FHP Assistance:
To provide a clearer understanding of how the First-time Homebuyers Program (FHP) can benefit individuals, let's explore several real-life scenarios.
Example 1 – Within Established Income Level and Established Home Value (Rural):
Applicant Income: $57,000
Home to be purchased: $175,000 home in the community of Wesleyville
Legal closing costs: $2,500
Required down payment: $8,750 (5% of purchase price of $175,000)
Assistance: $10,000
Loan Amount: $8,750 (5% of purchase price of $175,000)
Grant Amount: $1,250 (50% of legal cost of $2,500)
Additional down payment funds required: $0
Additional legal costs: $1,250
Example 2 – Within Established Income Level, Home Above Maximum Purchase Price (St. John’s Metro):
Applicant Income: $70,000
Home to be purchased: $375,000 home in the city of Mount Pearl
Legal closing costs: $4,750
Required down payment: $18,750 (5% of $375,000)
Assistance: $19,000
Loan Amount: $17,500 (Variance Policy to allow 5% of the maximum purchase price of $350,000)
Grant Amount: $1,500 (lesser of 50% legal costs or $1,500)
Additional down payment funds required: $1,250
Additional legal costs: $3,250
Example 3 – Exceeds Established Income Level, Home Above Maximum Purchase Price (St. John’s Metro):
Applicant Income: $90,000
Home to be purchased: $375,000 home in the City of Mount Pearl
Legal closing costs: $4,750
Required down payment: $18,750 (5% of $375,000)
Assistance: $16,500
Loan Amount: $15,000 (Maximum loan of $17,500, less $2,500 ($500 for each $1,000 over income limit))
Grant Amount: $1,500 (lesser of 50% legal costs or $1,500)
Additional funds required: $3,750
Additional legal costs: $3,250
Example 4 – Exceeds Established Income Level, Home Within Established Purchase Price (Regional Centre):
Applicant Income: $95,000
Home to be purchased: $300,000 home in the community of Clarenville
Legal closing costs: $4,000
Required down payment: $15,000 (5% of $300,000)
Assistance: $11,500
Loan Amount: $10,000 (Maximum Loan of $15,000, less $5,000 ($500 for each $1,000 over income limit))
Grant Amount: $1,500 (lesser of 50% legal costs or $1,500)
Additional funds required: $5,000
Additional legal costs: $2,500
These examples showcase the versatility of the FHP, illustrating how it caters to various income levels, home values, and regions, making homeownership an attainable goal for a broad spectrum of first-time buyers.