What is a NIFA Loan?

A guide to buying a home in Omaha for as little as $1,000 down.

NIFA, the Nebraska Investment Finance Authority, is a Nebraska state government office with several responsibilities. One of the most important of these is to issue loans to homebuyers.

Not everyone buying a home can qualify, and not all homes are eligible, but for those that meet the requirements, a NIFA loan offers significantly better terms than a mortgage from a bank. In this post, we will explain the specifics of a NIFA loan, what you need to do to qualify for a NIFA loan, and what kinds of houses qualify as valid for a NIFA loan.

It's a program that homebuyers should be aware of, because if their purchase of a house is eligible then they can save a considerable amount of money and reduce the size of their down payment.

What exactly is a NIFA loan?

A NIFA loan is a loan that comes from NIFA instead of a bank. The actual institution that handles the logistics of the loan is still a bank- they are just acting as an intermediary for NIFA, which is lending out the money. So to obtain a NIFA loan, you need to find a local mortgage lender, like a bank or credit union, and ask if they handle NIFA loans.

NIFA loans have lower interest rates than bank mortgages, and NIFA also has a program to provide assistance with the down payment. NIFA can provide up to 5 percent of the selling price of the home for you, the buyer, to use towards the down payment or closing costs. If you accept this assistance, you must take out a second mortgage with an interest rate of 1 percent and put up a minimum of $1,000 towards the down payment from your own money.

How do I qualify for a NIFA loan?

To qualify for a NIFA loan, you must satisfy several requirements.

First, you must be a first-time homebuyer. That means you have not owned your own living space for the past three years. There are some exceptions to this rule: if you lost a home through divorce, a natural disaster, or a job relocation, you might still qualify. Mobile homes do not count towards owning your own living space if you lived in one and it still had wheels and road gear and was free to move, rather than being anchored in place.

Next, you need to meet an income requirement. If the combined income of everyone in the family is above a certain threshold, then you cannot take out a NIFA loan. The threshold varies based on how many people are in your family and which county the home is located in. You can see the current income requirement at this link. As a borrower, you need to pass a credit check, and the loan cannot create a debt to income ratio greater than 45 percent.

Finally, the home must be your primary residence.

What kinds of homes qualify for NIFA loans?

Because NIFA is designed to facilitate homeownership, the home cannot be used for renting, and no more than 15 percent of it can be used for business. Furthermore, NIFA loans cannot be used to refinance a mortgage on a house you already have- they apply to the purchase of a new home.

The home's price must be below a certain point. Like the income requirement, this varies based on the location of the home as well as how many units are in the home. There is an additional benefit if the home is located in what NIFA calls a "targeted area", which is one of Adams County, Douglas County, Jefferson County, Lancaster County, or Scotts Bluff County. A home in a targeted area has a higher limit for price and family income, so more people and more homes qualify. If you want to buy a home in a targeted area, then you do not need to be a first-time homebuyer to qualify for a NIFA loan.

Why should I take a NIFA loan?

In addition to the aforementioned down payment assistance system, NIFA loans also have lower interest rates than bank loans. You can see the current rates at this page.

The lower rate saves you a significant amount of money over the lifetime of the loan. So if you qualify, it is an excellent way to save some money on your new home.