Am I eligible for the first time home buyer Tax Credit Program?
If you are a first-time homebuyer, then you may have heard talk about a federal tax credit program. This program refers to a change in legislation in 2008, but it ended in 2010. Eligible homeowners had to have purchased their homes between April 8, 2008, and May 1, 2010, to receive the credit.
Are There Other First-Time Homebuyer Programs?
Even though the federal tax credit program is no longer an option, several programs provide you monetary assistance when purchasing your first home. Most programs are available through your state, county, or city, and come in all different types, depending on your eligibility.
Keep reading to find out which programs work best for you.
Down Payment Assistance Grants
Down Payment Assistance (DPA) Grants give you matching funds for money deposited into a savings account. Some programs allow these funds to go towards closing costs as well as down payments. Most loans don’t cover closing costs, and if the seller doesn’t help out with that portion, it comes out of your pocket. With a DPA program, that’s an extra worry taken care of ahead of time.
Individual Development Accounts
Individual Development Account (IDA) programs are similar to Down Payment Assistance programs in that they match what you deposit up to a certain amount, but they only cover your down payment. The amount of matching funds depends on the program, and sometimes you can get funds from your state and the government.
There are specific requirements for this program, such as meeting with a specialist who helps you work on your finances. You also have to go to a few free classes on the home buying process and a financial education class as well.
IDA programs ask you to use a real estate agent and lender experienced in IDA programs, but you are free to choose who you want. Make sure you check out this map of available IDA programs in your area.
The Good Neighbor Next Door Program
The GNND program is available to teachers, police officers, first responders, medical professionals, and firefighters. Sponsored by the U.S. Department of Housing and Urban Development, this program gives a 50% discount off of HUD houses located in revitalization areas throughout the United States. If you work in one of those areas, you are eligible.
You are required to live in the house for at least three years, and there may be building or remodel requirements. You have seven days to enter a bid, and if there are any other bidders, they hold a lottery.
Once the house is yours, they create two separate mortgages. The second mortgage has no interest, and you are not required to pay it back. This program was designed to help heroes like you find a home at a discounted price and to bring good people to areas that need help. Not every HUD house is eligible for this program, so check with your real estate agent and lender.
HUD Programs
The U.S. Department of HUD has many home buying programs, as well as a list of state-funded programs for which you may be eligible. You might have several options in your location that you can combine and utilize at the same time.
For example, when you go to a financial education class through an IDA program, you learn that you can have an IDA and still be eligible for the Good Neighbor Next Door Program. There are many options you may qualify for that can help you buy your first home.
VA Loans
If you are in the military, either active, retired, or a veteran, you have the chance to buy a home using a VA loan. These loans do not require a down payment or mortgage insurance. There are income and debt requirements, and the VA lenders may have additional requirements, but you do not have to be a first-time home buyer to qualify. Read our article here about getting a Certificate of Eligibility for a VA loan.
USDA Loans
USDA LoansUnited States Department of Agriculture loans are available to anyone looking for homes in areas that are rural or suburban. If you are already looking to live in one of those areas, this loan is perfect for you. If you can commute to work while living in these areas, a USDA loan can help you get the house you want. Click here for a list of regional requirements.
The USDA offers three different programs. Direct loans are available for applicants who have low income. Depending on where you want to live, you can ask for as little as 1% for a down payment. The second option is loan guarantees, offered by participating lenders, depending on the area. A large down payment is not required, but your insurance premiums will be higher. The third USDA option involves home improvement grants and loans. These give you the opportunity to repair and improve your home without having to apply for two separate loans. This program can give you up to $27,500 in assistance.
FHA Loans
Federal Housing Administration loans are an option if you have a low credit score. The FHA assures a portion of the loan, so lenders are more willing to extend the requirements for borrowers.
You can purchase a home with a minimum downpayment of 3.5%. Insurance premiums are higher with an FHA loan, and they last for the entirety of the loan. Once your credit score improves, though, a Homes for Heroes lending specialist can assist you in refinancing.
State Home Buying Programs
There are many state-run programs for first-time homebuyers. Depending on the requirements, you may be eligible for more than one. There may be several Home Buying Programs that are available in your state. Look at interest rates, loan requirements, and payback options. Some home loans are like cash loans and will charge you much higher interest.
Navigating through this list of options and finding the right first-time home buyer program may feel over-whelming. The good news is that Homes for Heroes specialists are well-versed in these programs and how they work in conjunction with the rewards you are eligible to receive through Homes for Heroes. If you are a firefighter, military member, EMT, medical professional, teacher, or police officer, visit Homes for Heroes to find a real estate specialist and lender in your area. They will answer your questions, help you find the best financing options for your home loan and get you into your new home with significant savings.
As you note, there is no longer a first-time homebuyer tax credit like the generous one used to spur home sales back in 2008-2010. However, certain low- and moderate income homebuyers (and possibly homeowners) may be able to take advantage of their state’s Mortgage Credit Certificate program.
Not all states offer these, but many do. Frequently, these allow for a percentage of the interest you pay on your mortgage (20% to 50% is common) to count as a reduction in your federally-taxable income. These often have a cap of $2,000 per year, but this could mean hundreds of dollars in income tax savings to a homeowner of modest means. Information for this can usually be found at your state’s mortgage or housing finance agency website.