State Bond Learn how State Bond Home Loan programs help first-time home buyers.

State Bond or Mortgage Revenue Bond Home Loans
State Bond Loans, funded by the issuance of Mortgage Revenue Bonds (MRB), are designed to provide eligible homebuyers a below-market interest rate. The programs are available throughout the United States and sponsored by state or local Housing Finance Agencies (HFA). The HFAs sell tax-exempt mortgage revenue bonds to investors. The proceeds from the sale of these bonds are used to make below-market rate loans to eligible homebuyers.

Benefits of a State Bond Loan
There are many benefits to getting a State Bond Loan from your State or local Housing Finance Agency (HFA).  They are:

  • A below-market rate that is often 1/2 to 3/4 of a percent lower
  • Long-term affordability and savings with lower monthly house payments
  • Ability to buy more house with increased purchasing power
  • Reasonable fees

The rate you can get with this type of home loan program varies by HFA and current conditions, but it is typically less than the standard rates mortgage lenders are charging. The benefits of your local State Bond Loan will vary, so you need to carefully compare rates at the specific time you are locking your rate.

Eligibility of State Bond Loan
Generally the loans are available to first-time home buyers who have not owned and occupied a home in the past three years. This requirement though is waived in specific target areas. To qualify, you must also meet the applicable income and purchase price limits for the area in which you are purchasing a home. In the specific "target areas" you do not have to be a first-time home buyer to qualify for the program. With a State Bond Loan you are required to occupy the home as your primary residence.

Compatiblity of a State Bond Loan
When you get a State Bond Loan, the Housing Finance Agency is the investor of the loan, but most states do not insure the loan. For that reason, you normally combine the loan program with an FHA, VA, USDA Guaranteed Rural Housing Loan or a Conventional Loan with Private Mortgage Insurance (PMI).

Obtaining a State Bond Loan
Not every mortgage loan officer participates in their local bond loan program, so you need to carefully interview and select from loan officers who do. Click on the following link to learn more about the homebuying programs available in your state.

State Bond Loan Fees
State Bond loan fees are limited by the state and local housing finance agencies' that offer them. With the local HFA limiting the maximum amount of fees being charged, borrowers are somewhat protected from being charged extremely high fees. Prior to selecting this loan program, you will have the opportunity to see and compare the program's fees to other loan opptions to see for yourself which loan program best meets your needs.