A Guide For Rhode Island First-Time Home Buyers: Loan Programs And Grants

Rhode Island is a beautiful state, known for its beaches and historical towns. While the state is famous for its coastal mansions, there are many sizes and types of homes available across the state. Rhode Island offers many loan programs and grants to first-time home buyers. If you are hoping to buy a home in Rhode Island, keep reading to see if one of these programs might benefit you.

Who Qualifies As A First-Time Home Buyer In Rhode Island?

Qualifications for first-time home buyers buying a house will vary by program and their definitions of homeownership. If you have never owned a home before, you should qualify as a first-time home buyer. However, if you have previously owned a home but have not owned a home in the previous 3 years, many programs will consider you to be a first-time homeowner as well.

Rhode Island Home Buyer Stats

Here are a few important statistics on Rhode Island home buyers:

• Median sale price:for a home purchase in Rhode Island is $378,367.
• Minimum down payment: The minimum down payment amount in Rhode Island is $65,817.
• Average credit score: The average credit score for borrowers in Rhode Island is 723.
• Median household income: The median household income for Rhode Island is $74,489.

First-Time Home Buyer Mortgage Options In Rhode Island

Once you determine how much house you can afford, it’s time to find a mortgage. There are several nationwide first-time home buyer loans that would apply to home buyers in Rhode Island:

• FHA loans
• VA loans
• USDA loans

FHA loans

FHA loans are a federal loan program that allow home buyers to secure a mortgage with only 3.5% down payment, assuming that the borrower has a credit score of 580 or higher. This loan can be for the entire value of a home and FHA loans can be made for people with slightly lower credit scores with a higher down payment. This is a great option for home buyers without a lot of savings for a down payment.

VA loans

VA loans are available exclusively to members of the military and their family members. VA loans are available for up to the full value of a home - no down payment necessary. Even if there is no down payment, there is often a VA funding fee which is between 1.25% and 2.5% of the loan value.

VA loans also have some of the lowest closing costs of any loan. This is a great option for members of the military without a lot of savings for a down payment who may be moving around or just starting out in a permanent location.

USDA loans

USDA loans were created to help encourage homebuyers to move to rural areas. These loans can cover 100% of the home’s value – meaning no down payment necessary. However, they are very limited. The home must be in a designated rural area and the household income cannot exceed 115% of the median income in the area where the home is located.

This loan is a great option if you have a low to medium income and want to buy a home in a rural area. If you’re able to work remotely and are looking to move out of the city, this could be an option for you.

First-Time Home Buyer Loan Programs In Rhode Island

There is one first-time home buyer program available to first-time home buyers in Rhode Island.

Rhode Island Housing

Rhode Island Housing (RIHousing) offers a first-time home buyer loan program. The RIHousing first-time home buyer mortgage offers up to 100% financing and down payment or closing cost assistance.

The maximum purchase price in this program is $546,752 and the property can be a single family to four-family home or condominium. The income limit is $112,555 for a 1- to 2-person household or $129,438 for a 3+ person household.

If you are a first-time home buyer with income below the limit purchasing a qualifying property, this program can be a great way to secure a good interest rate and get assistance with cash costs at closing.

Rhode Island Grants And Down Payment Assistance

There are several down payment assistance programs and grants available for Rhode Islanders. These programs may help to cover closing costs, or they may have additional closing costs themselves. Always check with your lender so you know the exact costs and requirements of the program.

RIHousing 10kDPA

The RIHousing 10kDPA program provides a $10,000 down payment assistance loan to first-time home buyers in Rhode Island. This down payment assistance loan has 0% interest but must be repaid when the property is sold or no longer used as the primary residence.

This program is eligible to:

• First-time home buyers
• Purchasing a 1- to 4-family home OR condominium
• Home must be occupied as a primary residence
• The property must be located in Rhode Island
• Home buyer must have a minimum credit score of 660
• Home must be priced under $546,752
• Home buyer’s annual household income must be less than $112,555 for a 1-2 person household or $129,438 for a 3+ person household
• Home buyer must complete an online homebuyer education course
• Mortgage must be obtained through a participating lender

RIHousing Extra Assistance

The RIHousing Extra Assistance program allows first time home buyers to get a second mortgage loan – up to 6% of the purchase price, or $15,000, whichever is lower – to be used for down payment or closing cost assistance. This loan has the same interest rate as the first mortgage.

This program is eligible to:

• First-time home buyers
• Purchasing a 1- to 4-family home OR condominium
• Home must be occupied as a primary residence
• The property must be located in Rhode Island
• Home buyer must have a minimum credit score of 620
• Home buyer must complete an online home buyer education course
• Mortgage must be obtained through a participating lender

FirstHomes Tax Credit

The FirstHomes Tax Credit program provides a dollar-for-dollar tax credit of 20% of the total mortgage interest paid – up to $2,000 per year. The remaining mortgage interest can be claimed as an itemized deduction, which reduces tax liability as well, though not dollar-for-dollar like a tax credit does.

This credit can be claimed each year, as long as the home is maintained as the primary residence.

This program is eligible to:

• First-time home buyers OR any home buyer in Central Falls (parts of), Pawtucket, Providence, or Woonsocket
• Homes with a purchase price under $546,752
• 1- to 4-family home family homes or condominiums
• Home buyer’s annual household income must be less than $112,555 for a 1- to 2-person household or $129,438 for a 3+ person household

FirstGenHomeRI

The FirstGenHomeRI program provides $25,000 in down payment or closing cost assistance for first generation home buyers in Rhode Island. This loan has a 0% interest rate and no monthly payments. It will be forgiven in full if the property remains the buyer’s primary residence for 5 years.

This program is eligible to:

• First-time home buyers
• First generation homeowner (this is defined as a person whose parents or guardians never owned a home during the home buyer’s lifetime or lost the home to a foreclosure or short sale and does not own a home now. Anyone who lived in foster care also qualifies as a first-generation home buyer)
• Home must be 1- to 4-family homes or condominiums
• Buyer must have a minimum credit score of 660
• Home must have a purchase price under $546,752
• Home buyer’s annual household income must be less than $112,555 for a 1-2 person household or $129,438 for a 3+ person household
• Home buyer must complete an online homebuyer education course
• Mortgage must be obtained through a participating lender
• Home must be located in Central Falls, East Providence, Pawtucket, Woonsocket, Providence or Newport

Popular Places To Live For First-Time Home Buyers In Rhode Island

Rhode Island is a small state geographically, but it is an appealing place that many people want to move to. The real estate market is, like much of the country, competitive. That being said, there are many cities that actually have their own first-time home buyer assistance programs.

Cranston 

Cranston is the second largest city in the state of Rhode Island. Cranston’s first-time home buyer program includes a closing cost assistance program and a down payment assistance program. Both of these programs are grants that are fully forgiven after the property has been held as a primary residence for 5 years.

The Closing Cost Assistance Program will provide up to $3,000 in closing cost assistance to first-time home buyers. The Down Payment Assistance Program provides 50% of the required down payment, up to $5,000, for eligible first-time homeowners. These programs cannot be combined – you can only use one on a purchase.

If you are interested in moving to Cranston, be sure to check out the Cranston real estate trends and Cranston homes for sale.

Providence

Providence is the capital of Rhode Island and its most populous city. Providence’s down payment and closing cost assistance provides up to $20,000 of down payment and closing cost assistance to eligible homebuyers purchasing in the City of Providence. This is provided as a loan that is forgiven after 5 years (loan up to $15,000) or 10 years (loans totaling $15,000-20,000), assuming the property remains owner-occupied that whole time.

Program eligibility:

• Home must be located in Providence
• Home must be a single-, 2-, or 3-family home
• Home must be used as a primary residence
• Home buyers must meet underwriting ratios as well as income and price limits
• Home buyer must complete an online homebuyer education course 

If you are interested in moving to Providence, be sure to check out the Providence real estate trends and Providence homes for sale.

Woonsocket

Woonsocket is in northern Rhode Island, right on the Massachusetts border. The Woonsocket housing assistance program offers a First Home Down Payment Assistance Program. This program offers a down payment assistance loan up to $7,500. 50% of the loan is forgiven if the owner remains in the home for at least 5 years. The remaining 50% of the loan must be repaid upon the sale of the home.

If you are interested in moving to Woonsocket, be sure to check out the Woonsocket real estate trends and Woonsocket homes for sale.

First-Time Home Buyer RI FAQs

Here are some frequently asked questions about first time home buyer programs in Rhode Island.

What credit score is needed to buy a house in Rhode Island?

A 620 credit score or above is needed for the first-time home buyer assistance programs in Rhode Island. Several of the programs require at least a 660 credit score.

How much do first-time home buyers have to put down in Rhode Island?

In general, the lowest possible down payment is 3%. If you qualify for a VA or USDA loan, you may be able to buy with no down payment - though there will still be closing costs associated with the loans.

What is the interest rate in Rhode Island?

Interest rates in Rhode Island, as in the whole country, change daily, so you will be locked into a rate on the date of purchase. Additionally, interest rates are also dependent on your credit score and whether you are getting a 15-year or 30-year mortgage. That said, at the end of 2022, interest rates on a 15-year mortgage were around 6% and a 30-year mortgage were around 6.5%.

What’s the average monthly mortgage payment in Rhode Island?

The average monthly mortgage payment in Rhode Island is $1,837.

What’s the cost of living in Rhode Island?

Cost of living varies from city to city, but in general the cost of living in Rhode Island is 5% –15% higher than the United States average.

The Bottom Line

Rhode Island is a beautiful place to move, and the state – and even certain cities – offers plenty of first-time home buyer programs to make that move possible. If you are ready for a new beginning, start the mortgage approval process today.