Cover story: Programs help buyers afford homes
Despite the end of the federal homebuyer tax credit - home-purchase contracts had to be signed and ratified by April 30 to qualify - potential homebuyers have plenty of other opportunities for down-payment and closing-cost assistance along with low-interest mortgage loans that can make it easier to afford a home.
Some programs are limited to first-time buyers; others require homeowners to buy property within a certain area or are restricted by income level. Some programs are available for government employees or employees of participating employers. Every homebuyer should consult with a knowledgeable local Realtor and lender and also research on his or her own to be certain not to miss out on some potentially valuable assistance.
“The District’s first-time homebuyer tax credit of $5,000 is a great option because you can have owned property in other locations outside the District,” says Steve Dean, a Realtor with Re/Max Allegiance in the District. “As long as the buyers have not owned within the previous the year in the city, they can qualify.”
The D.C. first-time homebuyer tax credit is limited to households with incomes less than $90,000 if single or $130,000 if married filing jointly.
The D.C. Tax Abatement Program offers a five-year exemption from paying property taxes. This program is limited to homes with a purchase price of less than $319,920 and also has buyer income limits starting at $53,760 for a single person.
“The D.C Tax Abatement Program not only saves you money on taxes for five years, but it exempts homebuyers from paying the 1.1 percent transfer and recordation taxes that are normally paid at the closing,” Mr. Dean says.
The D.C. Bond Program offers a low-interest loan along with $10,000 in down-payment and closing-cost assistance. While 30 percent of the bond funds are available for mortgage loans to all buyers of primary residences in the city, the down-payment and closing-cost assistance is limited to households with an annual income of 80 percent or less of the area’s median income.
Mr. Dean recommends that buyers talk to their agent and their lender about potential ways to control the upfront costs of buying a home.
“Sometimes you can write an offer to purchase that allows the seller to pay all the closing costs so that the buyers can concentrate all their cash on the down payment,” Mr. Dean says.
A variety of programs that can help buyers with cash are available from government and private sources.
“Coldwell Banker has introduced our own Buyer Bonus program in anticipation of the ending of the federal homebuyer tax credit,” says Chris Upham, a Realtor with Coldwell Banker Residential Brokerage in Alexandria, Va. “Home sellers who opt to participate in the program will credit buyers 3 percent of the sales price up to $8,000.”
There is no deadline for settlements on properties in the Coldwell Banker program, but contracts must be signed by July 31.
Michelle Mathews, a home mortgage consultant with Prosperity Mortgage Co. in Clarksville, Md., says most consumers are not aware of the significant difference a low mortgage interest rate can make in the affordability of a home purchase.
For example, a $400,000 loan with an interest rate of 6.5 percent will require monthly payments of approximately $3,110. With a loan at 4.8 percent, the monthly payments will be approximately $2,680.
“Buyers can take advantage of these low rates and have significantly lower monthly payments than if they had bought a home a year or so ago,” Mrs. Mathews says. “Buyers who are challenged to come up with the cash for a down payment should look into FHA loans, which still require only 3.5 percent of the purchase price for a down payment. Those who have served our country can also apply for a VA loan, which doesn’t require any down payment at all.”
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