What to know about buying a house in Connecticut

Being a Connecticut first-time home buyer might feel like an uphill battle, with home prices rising by more than 20% between mid-2020 and mid-2021. But don’t despair!

Connecticut has special, inexpensive mortgages for first-time buyers. And you may be able to get financial help, bridging the gap between your savings and your down payment needs.

All in all, buying your first house might be more affordable than you imagined.

In this article (Skip to …)

• CT home buyer overview
• Home loan options
• CT home buyer programs
• First-time buyer grants
• Buying in Connecticut’s cities
• Resources
• CT mortgage rates

• Conventional 97 — From Freddie Mac or Fannie Mae. 3% down payment and 620 minimum credit score. You can usually stop paying mortgage insurance after a few years
• FHA loan — Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. But you’re typically on the hook for mortgage insurance until you refinance to a different type of mortgage, move, or pay off your loan
• VA loan — Only for veterans, active-duty military members, reservists, and National Guard. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance after closing. These are arguably the best mortgages available, so apply if you’re eligible
• USDA loan — For those on low-to-moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Low mortgage insurance rates
• Connecticut Housing Finance Authority — May include competitive mortgage interest rates and can be used with down payment assistance. More information below

Note that most of these programs require you to buy a primary residence. That’s a home you’ll live in full-time, not a vacation home or investment property.

Still, depending on the loan type you choose, you could potentially get into your new house with minimal cash out of pocket.

These programs even let you use gifted money or down payment assistance (DPA) to cover the down payment and closing costs.

If you’re not sure which program to choose for your first mortgage loan, your lender can help you find the right match based on your finances and home buying goals.

The Connecticut Housing Finance Authority (CHFA) offers two main home loan options, though there are others for those with specialized needs. The two big ones are:

1. HFA Advantage and HFA Preferred mortgage programs — Provide lower mortgage insurance premiums than normal, which can reduce your monthly payments
2. Homebuyer Mortgage Program — Below-market interest rates and access to down payment assistance. If you can afford monthly mortgage payments but need help with your upfont home buying costs, this first-time home buyer program might be for you

Both are mainly available to Connecticut first-time home buyers, including those who haven’t owned a home within the previous three years. However, someone buying in a targeted area may be in line for help even if they’re not a first-time buyer.

As is usual with these programs, there are caps on both the maximum sale price of the home and the household income of the borrowers. But the CHFA resource map will show you what those figures are for the place where you want to buy.

Additionally, you’ll have to complete a home buyer education course and use one of the CHFA’s approved lenders to qualify for one of these mortgages.

The CHFA down payment assistance program doesn’t offer grants. Instead, eligible applicants can get loans with an interest rate of just 1% (valid through at least 12/31/21). These have to be repaid in parallel with your mortgage. So expect to have to show that you can comfortably afford both monthly payments.

CHFA lets you borrow up to $20,000 toward your down payment. However, your loan amount can’t exceed the required down payment for your loan program: 3-3.5% of the purchase price, depending on which mortgage you use.

Need to know more? Get in touch with a local CHFA-approved lender or call the CHFA Single Family Department at (860) 571-3502. The email address is [email protected].

Also don’t think that the CHFA is the only down payment assistance in town.

Below, you’ll find a list of organizations providing help for first-time home buyers in individual cities and counties across Connecticut. And be sure to check out any that serve your area. Because they may offer a down payment assistance program that suits you better than the statewide option.

The City of Bridgeport has a good down payment program. In fact, the worst thing about it is the 48-page guide (PDF) you have to wade through to get some basic information.

The program “aids low-and moderate-income home buyers” by providing them with a forgivable loan to cover their down payment and closing cost needs. And because the loan is forgivable, you don’t make monthly payments.

If you borrow less than $15,000 this way, the loan will be fully forgiven after five years — at the end of which you’ll owe nothing on that loan. But the more you borrow, the longer the period you have to wait for it to be forgiven: 10 years for $15,000-$40,000 and 15 years for more than $40,000.

Note that you’ll have to repay the loan in full or in part if you sell, refinance, or move before the time when it’s forgiven.

If that guide is too full of dense legal language for you, ask for advice from Bridgeport’s Department of Housing and Community Development at (203) 576-8144 or via email at [email protected]. 

Stamford first-time home buyers

The median list price in Stamford was $619,000 in August 2021, according to Realtor.com. That was up 6.9% year over year.

If you want to buy a home at that median price, your down payment options might fall between:

• $18,570 for 3% down payment
• $123,800 for 20% down payment

The city’s Stamford HOME program is administered by Housing Development Fund, Inc. (HDF) And eligible applicants can get an interest-free loan of up to $20,000 toward their down payment and closing costs.

However, you must repay that in full when you sell the home, refinance your main (first) mortgage, transfer the title, or finish paying off that main mortgage. The website says:

“To be eligible for HOME funds, the total household income must not exceed 65% of the Area Median Income as adjusted for family size. All buyers will need to complete the HDF homeownership counseling program requirements. There is a $2,000 fee for this loan, payable to HDF at closing.”

There’s very little other information. But you can get in touch with HDF through an online contact form on its website.

New Haven first-time home buyers

The median list price in New Haven was $295,000 in August 2021, according to Realtor.com. That was up 22.9% year over year.

If you want to buy a home at that median price, your down payment options might fall between:

• $8,850 for 3% down payment
• $59,000 for 20% down payment

The City of New Haven has a decent down payment assistance program. You can borrow up to 6% of the purchase price of a home, up to a maximum of $10,000.

That takes the form of an interest-free loan, with no monthly payments. And it’s forgiven at a rate of 20% each year. At the end of year 5, you owe nothing. If you move, sell or refinance before then, you’ll have to repay the portion of the loan that remains unforgiven.

Want to know more? Email [email protected]

• Connecticut Housing Finance Authority — Homebuyer programs, including down payment and closing cost assistance
• CHIF/USDA Rural Services Homeownership Program — State/federal partnership that provides mortgage assistance to first-time homebuyers
• Housing Development Fund, Inc. — Homebuyer programs, including down payment assistance, for residents in Fairfield, New Haven and Litchfield counties
• Habitat for Humanity — Through volunteer labor, builds and rehabilitates houses for families in need
• U.S. Department of Agriculture Rural Housing — Homebuyer programs in rural communities

Programs by city/town in Connecticut:

• Bridgeport
• Fairfield
• Farmington
• Greenwich
• Hamden
• Hartford
• Manchester
• Meriden
• Middletown
• New Haven
• Norwalk
• Stamford

You can see today’s live mortgage rates in Connecticut here.

When you’re ready to start the home buying process, make sure you get personalized rate quotes from at least three mortgage lenders.

Don’t just look at advertised rates online; actually apply for preapproval and compare the interest rates and fees you’re offered. That’s the only way to know you’re getting the best deal possible on your new home loan.

Verify your new rate (Nov 24th, 2021)