How To Buy a Home Through the Neighborhood Stabilization Program

Learn how this HUD program works

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Looking for an affordable home can feel like a daunting task, especially in some areas of the country. However, the federal government has provided grants designed to help those with low to moderate incomes gain access to homeownership in areas that have been affected by abandonment and foreclosure.

Even though it’s winding down, there might still be a way for you to access funds from the Neighborhood Stabilization Program to help you get special financing to buy a home. Here’s what you need to know.

What Is the Neighborhood Stabilization Program?

During the 2008 financial crisis, in order to provide money to help stabilize neighborhoods and communities, the government authorized funding to target distressed areas with high rates of housing foreclosure and abandonment.

Congress set up the funding through grants, which were given to state and local governments, as well as to nonprofits. There were three rounds of funding in 2008, 2009, and 2010, but there have been no new grants since 2010. Today, according to the U.S. Department of Housing and Urban Development (HUD) Exchange—the federal housing authority’s web portal—most grantees are completing their activities.

Neighborhood Stabilization Program grant recipients developed their own programs to distribute the federal funds, so local and state programs are the sources of these funds for individual homebuyers.

Rather than applying to HUD for Neighborhood Stabilization Program funds, borrowers need to check with their state and local governments to determine whether they still can receive special financing help through this program.

Who Can Benefit From the Program?

First of all, it’s critical to note that at least 25% of the funds from this program had to be used by grant recipients to purchase and redevelop homes in certain U.S. areas that were hit by a high number of foreclosures or home abandonment. These residential properties are to be used to house lower-income individuals or families whose incomes do not exceed 50% of the area’s median income.

However, grant recipients were also able to use funds to come up with financing mechanisms to help those with low and moderate incomes purchase these redeveloped homes. With help from this program, you might be able to buy a formerly foreclosed home—as long as you meet the requirements.

To benefit from the Neighborhood Stabilization Program, you must be willing to buy a home in a targeted area, and your income cannot exceed 120% of that area’s median income.

For example, a common way to use the funds in Alameda County, Calif., was to renovate a home purchased from the bank, then sell it to a qualifying buyer for less than the total cost of purchase plus renovation. In one example there, Alameda County said the total cost to purchase and renovate a home was $384,579. But to make the home affordable to the buyer, it was sold for $285,000.

How To Apply for the Neighborhood Stabilization Program

There is no single way to benefit from this program. Grant recipients in different areas are allowed to develop their own programs and set their own priorities, so you must check with your state or local government to see if there’s anything available for you and your circumstances.

Each program administrator has its own rules and criteria for application. For example, in the state of Idaho, someone must go through the Idaho Housing and Finance Association to apply for homeowner assistance and special financing from the program.

In addition, the Neighborhood Stabilization Program requires you go through eight hours of classroom instruction about homeownership.

Before you apply, check with the appropriate authority to find out what documents are needed, the amount of the minimum down payment, and other requirements necessary to qualify for the program in your area. HUD states that no grant will cover 100% of the cost of a house, and the government will not give one to anyone who cannot use it toward a mortgage, which means qualifying for a mortgage is necessary.

You should also get an idea of which homes are available in designated areas.

Pros and Cons of Participating in the Program

Like most housing finance programs, there are advantages and disadvantages to participation. Here’s what you need to know about these programs.

  • Depending on the program administrator, you might have access to special financing to help you buy a home.

  • You might be able to buy a home for less than its market value.

  • It’s possible to get a recently renovated home without paying for the cost of updates.

  • You must buy a home in targeted areas, often neighborhoods recovering from vacancy issues and blight.

  • There might be a limited choice of homes available in the program.

  • Only those who meet certain income limitations can benefit from the program.

  • Funds are now limited, as the last round of funding was completed in 2010.

Alternatives to the Neighborhood Stabilization Program

Even if you don’t qualify for this particular program, you might still be right for another homebuying-assistance program. Various state, municipal, and county governments have their own programs that focus on helping individuals with lower incomes purchase homes. Start with your local programs to see what’s available.

Additionally, you can work with Fannie Mae to get help purchasing foreclosed properties through its HomePath program. With HomePath, Fannie Mae will help you identify qualifying properties and special financing programs and incentives for which you might be eligible.

Another option is to bid on HUD homes, rather than trying to see if you qualify for special programs that might have restrictive criteria. offers a number of options, and you can ask your real estate broker to help you place bids.

Don’t forget that there are also nonprofits designed to help you get into a home. If you’re willing to help build your own or others’ homes, for instance, you might be eligible for help with organizations like Habitat for Humanity. When you participate, you get special financing or a lower price in exchange for sweat equity, making the home more affordable. You might also be able to find nonprofits that offer down payment assistance.

The Bottom Line

While there are still some funds available for the Neighborhood Stabilization Program, it’s winding down, so you might have some difficulty finding eligible homes. However, it’s only one option when it comes to finding affordable homes to buy. With a little research, it’s possible to find a good deal on your next house—and maybe even get some help paying for it.