Rhode Island First-Time Home Buyer

What to know about buying a house in Rhode Island

As a Rhode Island first–time home buyer, you’re likely facing high property prices that are rising steeply. And that can feel like a real challenge.

But there’s good news, too: your state or city may have your back.

Rhode Island has special mortgages and homebuyer education courses for first–time buyers. And you might be in line for down payment assistance, which can bridge the gap between your savings and your home buying needs. Here’s how to get started.

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Rhode Island home buyer overview

By December 2021, the median list price for a home in Rhode Island was $399,000 according to Redfin. Statewide, home prices had increased 15.6% from the previous year.

You may be surprised to learn that both those figures were below the nationwide average. But that’s not much help if you’re working to save a down payment and keep seeing the goalposts move. So read on to learn about programs that can make buying a home more affordable in Rhode Island.

Rhose Island home buyer stats

Average Home List Price in RI	$399,900
Minimum Down Payment in RI (3%)	$11,997
20% Down Payment in RI	79,980
Average Credit Score in RI1	719
Maximum RI Home Buyer Grant2	Up to $20,000 as a forgivable loan in Providence

Down payment amounts are based on the state’s most recently available average home sale price. “Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.

If you’re eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the US Department of Agriculture), you may not need any down payment at all.

First–time home buyer loans in Rhode Island

If you’re a first–time home buyer in Rhode Island with a 20% down payment, you can get a conventional loan with a low interest rate. And you never have to pay for private mortgage insurance (PMI).

Of course, few first–time buyers have saved enough for 20 percent down. But the good news is, you don’t need that much. Not by a long shot.

Borrowers can often get into a new home with as little as 3% or even 0% down using one of these low–down–payment mortgage programs:

• Conventional 97 – From Freddie Mac or Fannie Mae. 3% down payment and 620 minimum FICO score. You can usually stop paying mortgage insurance after a few years once you reach 20% home equity
• FHA loan – Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. But you’re 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 and service members. 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 start at 640. Low mortgage insurance rates
• RIHousing loans – May include competitive interest rates and down payment assistance. More information below

Note that government loan programs (including the FHA, VA, and USDA home loans) require you to buy a primary residence. That means you can’t use these loans for a vacation home or investment property.

Depending on the mortgage loan 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.

RI first–time home buyer programs

Rhode Island Housing (RIHousing) offers several types of mortgages, including home renovation loans. To qualify, you’ll need to:

Beyond that, RIHousing’s website is light on detail. But, if you qualify, you might be in line for a First Homes Tax Credit (a mortgage credit certificate), which could reduce your federal tax liability. Ask a tax professional for more details on how an MCC would affect your taxes.

One important advantage of going with an RIHousing mortgage is that it means you could get down payment assistance. And we’ll be getting into that next.

RI first–time home buyer grants

RIHousing doesn’t do first–time home buyer grants. But it does offer assistance in the form of a repayable down payment loan or ‘second mortgage.’

The organization has two DPA programs that you can compare side–by–side on its website. The two programs are:

• 10kDPA Loan – $10,000 loan that can only be used toward your down payment (not closing costs)
• Extra Assistance Loan – Up to 6% of purchase price (not to exceed $15,000) that can be used for down payment and/or closing costs

Both are only available in conjunction with an RIHousing mortgage. And both have the same household income limits on the amount you can earn in order to be eligible:

• Up to $97,646 annually for a one– or two–person household
• Up to $112,293 annually for a three or three–plus person household

Those figures were accurate at the time of writing in Feb. 2022, but check back to see if they’ve changed by the time you apply.

If you need to borrow only $10,000, you’ll probably opt for the 10kDPA program. But all of the $10,000 you receive must go on your down payment, so you’ll have to cover your own closing costs. And you’ll need a credit score of 660 or higher to qualify.

10kDPA is a silent loan with no interest charges. So you make no monthly payments. Instead, you pay back the full amount you borrowed when you move out, sell the home, transfer it, or refinance, whichever happens first.

You can borrow more with an Extra Assistance Loan: up to 6% of the purchase price capped at $15,000. But your loan is a normal second mortgage. So you have to pay it back in equal monthly installments over 15 years. And you’ll pay interest on the loan amount, probably at the same rate that you do on your new mortgage.

There are two pieces of good news. First, you can use one of these extra assistance loans to help with your closing costs as well as your down payment. And, secondly, your credit score needs to be only 620 or better.

Buying a home in Rhode Island’s major cities

Home prices in Rhode Island’s three largest cities are a little lower than the statewide average.

In Providence, they rose during 2021 at roughly the same rate as the rest of the state. And, in Cranston, they climbed more slowly (11.7%). But Warwick had slightly higher home price inflation, with those prices jumping 19.9%.

Providence first–time home buyers

In December 2021, the median list price of homes in Providence was $299,000. That was an increase of 15.1% year–over–year, according to Realtor.com.

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

• $8,970 for 3% down payment
• $59,800 for 20% down payment

The City of Providence runs a down payment assistance program in conjunction with the Housing Network of Rhode Island. And it looks more attractive than the one offered by RIHousing.

You may be able to borrow up to either $10,000 or $20,000. And this loan has a 0% interest rate and requires no monthly payments. Better yet, it will be forgiven in full after five years if you borrow up to $15,000, or after 10 years if you borrow more than that.

Of course, there are various conditions and eligibility criteria. And you’ll need a relatively modest income to get this help. So click those links to see if you qualify.

Cranston first–time home buyers

In December 2021, the median list price of homes in Cranston was $335,000. That was an increase of 11.7% year–over–year, according to Realtor.com.

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

• $10,050 for 3% down payment
• $67,000 for 20% down payment

The City of Cranston has two programs to help first–time home buyers. The first offers up to $3,000 toward closing costs. And the down payment assistance program provides “50% of the required down payment, not to exceed $5,000.” But you can’t use both.

Again, there are relatively low household income limits, which you can find by clicking that link (scroll down to “First Time Home Buyers Programs”).

But there’s little other information. So take the website’s advice to call (401) 780–6240 for more details.

Warwick first–time home buyers

In December 2021, the median list price of homes in Warwick was $329,700. That was an increase of 19.9% year–over–year, according to Realtor.com.

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

• $9,890 for 3% down payment
• $65,940 for 20% down payment

We couldn’t find any trace of a down payment assistance program on the City of Warwick’s website. But you could call (401) 738–2000 to check that our information is still correct by the time you read this.

Otherwise, you can always apply for RIHousing’s help (above).

Where to find home buying help in Rhode Island

All the organizations we’ve listed above should provide advice freely to any first–time home buyer in the state of Rhode Island or within their areas.

In addition to our selection, the U.S. Department of Housing and Urban Development (HUD) provides a few lists for statewide, regional, and local resources:

Statewide and regional first-time home buyer programs in RI

RI first-time home buyer programs by city/town

What are today’s mortgage rates in Rhode Island?

You can see today’s live mortgage rates in Rhode Island 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.

¹ Source: Experian.com 2021 study of 2020 data

²Based on a review of the state’s available DPA grants at the time this was written