January 25th, 2018 7:03 AM by Jackie A. Graves, President
If you’re looking for financial support to buy your first home,
here’s a guide to help you navigate your options.
important to understand that many first-time buyer programs are marketing
messages more than they are actually a specific form of financial support for
example, you might see an advertisement from a mortgage lender saying something
like: “Ask Us About Our Special First-Time Home Buyer Programs”
doesn’t mean this lender is promoting programs with financial support for
a case like this, ask if the program being advertised offers specific financial
support for first-time buyers, or if they are promoting loan programs available
to all home buyers.
examples of loan programs available to all home buyers that are particularly
well-suited to first-time
home buyers include:
two examples illustrate how federal government support is inherent in the U.S.
housing finance system. Private lenders make these FHA, Fannie Mae and Freddie
Mac loans to you, but the government backs these loans, which means it’s less risky
for lenders to allow lower down payments and other features often sought by
first-time home buyers.
this federal government support, these loans would not exist in the private
these loans build in low-down, low-reserve features first-time buyers want,
rather than offering explicit financial support.
what does explicit financial support for first-time buyers look like?
response to the 2008 global financial crisis, the federal government offered
tax incentives for first-time home buyers, but there are no such programs
available at this time (as of October 2015), and these federal support programs
financial support programs are sourced through local governments and nonprofit
organizations. They can come in the following forms:
example, the city of Seattle offers up
to $45,000 per household in down payment assistance to first-time home buyers.
most other cities offering this kind of down payment assistance, they have
income thresholds you must meet to be eligible. In Seattle’s case — which is
representative of how these programs work in many cities — you must be at or
below 80 percent of area median income to be eligible. Each city will post an
income table on their websites to make it easy for you to determine your
each city will post full terms on their programs — including whether the down
payment assistance has to be paid back like a loan or paid back after you sell,
and whether the city shares in your home’s appreciation.
another example, the city of San Francisco offers a tax credit program which
significantly increases your tax benefit as a first-time home buyer.
a homeowner gets to claim mortgage interest as a tax deduction. This means they
subtract mortgage interest paid in a given year from their gross income to
arrive at a new, lower taxable income. Paying tax on this lower income is how
homeowners save money at tax time.
mortgage tax credit program is different and more beneficial than a mortgage
tax deduction program.
San Francisco’s mortgage tax credit program — which, again, is representative
of how these programs work in many cities — 15 percent of the mortgage interest
you pay each year is deducted directly from your annual tax obligation, and the
remaining 85 percent of your mortgage interest is taken as a deduction from
your gross income in the usual manner. The end result: you significantly
reduce your overall cost of homeownership.
How to Find First-Time Home Buyer Financial Support
are two ways to find these types of financial support programs in your area:
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