August 12th, 2017 6:26 AM by Jackie A. Graves, President
How do you go from dreaming of owning a home to holding your
first set of keys? If you’re like most first-time buyers, the down payment is
your biggest hurdle. But, it could pay off big time to know your down payment
are more than 2,400 homebuyer programs available across the country–they can be
as unique as the homebuyers and communities they serve. Let’s break down the
basics of today’s homebuyer programs.
What are homeownership programs?
can include loans, grants, tax credits and other programs for eligible
homebuyers that can help them achieve the down payment faster, cover closing
costs and get into a home sooner than they would have otherwise.
Who offers these programs?
Housing Finance Agencies (HFA) often offer the broadest array of opportunities.
and Counties offer programs with criteria adjusted for local median income and
How do you qualify?
you and the home you are purchasing must be eligible. Homeownership programs
are for owner-occupant buyers only, no investment properties. You must make a
minimum investment, qualify for a first mortgage and complete homebuyer
education. Common eligibility factors include the
home’s sales price, homebuyer income and homeownership history.
your occupation can help give you a boost. There are often additional benefits,
or even entirely separate programs, for educators, protectors, health care
workers, veterans and households with disabled members.
Do you have to be a first-time homebuyer?
it’s important to know that a first-time homebuyer is defined as someone who
hasn’t owned a home in 3 years. So, if you’ve owned in the past, but are
renting now, you may be a first-timer again! Plus, across our databank of
programs, 37 percent don’t have a first-time homebuyer requirement.
programs are normally soft second or third mortgages or grants, providing
benefits such as 0% interest rates, deferred payments and forgivable loans. The
assistance amounts will range from a few to tens of thousands of dollars and
can be used towards the down payment, closing costs, prepaids, principal
reductions and/or repairs.
count out high cost markets. Program benefits and
eligibility requirements are adjusted based on a percentage range of the area’s
median income and home prices.
you’re purchasing a home in a target area designated by the housing finance
agency, you may receive special benefits such as higher assistance amounts,
more lenient income requirements and if there’s a first-time homebuyer
requirement, it may be waived.
larger housing finance agencies, particularly at the state level, offer first
mortgages to accompany their down payment assistance programs. These first mortgages
typically offer a below market interest rate, and may even have reduced closing
costs, fees and no mortgage insurance requirements.
are often funded by state housing finance agencies and may subsidize portions
of the interest to offer effective rates below what the normal market can
provide, helping lower your buying costs and monthly payments.
USDA also has two first mortgage programs: the Rural Direct Loan and the Rural
Guaranteed Loan. Both loans are primarily used to help low- and moderate-income
individuals or households purchase homes in rural areas. Funds can be used to
acquire, build (including purchase and prepare sites and provide water and
sewage facilities), repair, renovate or relocate a home.
Credit Certificates (MCC)
This annual federal income tax credit is designed
to help first-time homebuyers offset a portion of their mortgage interest on a
new mortgage as a way to help qualify for a loan. As a tax credit, not
a tax deduction,
the MCC helps you reduce your annual taxes dollar for dollar. The mortgage
credit allowed varies depending on the state or local government that issues
the certificates, but is capped at a maximum of $2,000 per year by the IRS.
MCCs can often be used alongside another down payment program.
As an example, if you were
to receive an MCC that offers a 25% credit on a $200,000 loan for 30 years with
a rate of 4%, the allowable tax credit would be figured as follows.
Plus, you can continue to receive a tax credit for as long as
you live in the home and retain the original mortgage.
Courtesy of Down Payment
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