Did you know each state sets aside billions of dollars for first time home buyer grants? That’s right. There is a lot of opportunities out there that even banks don't know about or don’t want you to know about. Down payment assistance programs, bond programs and tax credits can really help you to to get into that house that you've always wanted to own. Scroll down below to see the full map for your state programs.
With interests rates rising along with real estate prices, it pays to know about any kind of tax credit available to you. In addition, there are so many individual state, local county and city programs for first time home buyers, it pays to get with a local Realtor®. Which one is best for you? Utilizing these specific tax incentives and tax grants, you will be able to purchase your home.
In many cases you can get $5,000-$30,000 of assistance with closing costs, down payment and tax credits. See the current map below of available home buyer assistance programs in your state or contact your local Realtor® for the most up to date information.
First Time Home Buyer Grants Are Not Bank Promoted
Walk in your bank and try to ask for a Tax Credit and see how they stare at you. It’s not going to happen at the bank level. Many first time home buyers are never told about this valuable program. You need to do your homework and find a specialist lender, not a big bank to get a better mortgage loan. A lot of banks and lenders aren't approved to be able to offer this program. They don't want you to know about it because they actually make less money whenever they offer it.
It can really make a difference and whether or not someone can afford to buy a house or not. The biggest complaint from people today when they want to buy a house is they can’t come up with that down payment. They have the both the income and can make the payment but putting the down payment can be tough. So these tax credits are here to help people to either boost their purchasing price, lower their debt to income ratio and also help the closing cost.
A Great First Time Home Buyer Grant The MCC - Mortgage Credit Certificate Tax Credit
The first type of first-time buyer Tax Credit which was one of my all-time favorites is called a first time buyer MCC mortgage credit certificate tax credit. Below is a detailed map of state home buyer assistance programs available now.
It's available in about twenty eight states all over the country. Contact me here and I will get you in touch with a local mortgage lender that specializes in the MCC tax credit. In some situations you can combine tax credit grants with different loan programs to get you qualified. A truly great buyer program.
MCC Tax Credit information
Must be a First Time Home Buyer ( not owned a house last 3 years )
Income must be below a certain amount per year. Usually Less than $80-116K ( Varies by your State, City, County, Single or Married Status )
MCC is a Tax Credit not a Deduction
Never expires as long as you remain in the home
Annual Tax Credit ( Not one time )
20% the interest that you pay on the mortgage
Does not take any longer to fund
First Time Buyer Grant Benefits
The MCC is a tax credit not a deduction. So the first time buyer tax credit is going to boost your purchasing power because it lowers your debt ratio. You're able to add an extra amount up to $2,000 a year of income onto your income that you already have. That's going to help you to boost how much you can qualify for. So let's say that you live in the house for five years, every single year when you file your taxes, you can actually write off $2,000. So that's an income tax liability to help to reduce your tax burden. It’s really a dollar for dollar tax credit. This never expires as long as you remain in the home.
This amount varies all over the country. But this really adds a $2,000 of income onto your application to help you to qualify for more. More importantly you're able to for the life of the loan, for however long you live in the house, you're able to write this off on your taxes. $2000 every single year can be written off. This program boosts your purchasing power usually by about $15,000. Essentially this provides you with a higher qualifying amount.
This is very helpful as many areas in the country real estate prices are going up. For example you have a $500,000 mortgage at a 5% interest rate, you’re paying $25,000 in interest. You get a certificate which you then get a 20% tax credit. That $25,000 in interest turns into $20,000. The $5,000 comes off your tax line. If you were at the end of the year going to get a tax refund of $1500, you will now get a $6500 tax refund. This is a big deal!
Veterans first time home buyer grant
Another example is one person can do a VA loan combined with the MCC tax credit now can have a lower loan, no mortgage insurance. The effective mortgage payment would be at around 3.75%. VA loans offer no down payments for veterans.
If you are looking to use your VA mortgage for the very first time. It is a 2 to 1 match. You put down a $1,000 and you get an additional $2,000 to match it. The only caveat is you have to put down a downpayment. The VA does not always require you to do this. But if you do or if you are interested in reducing your funding fee this is a great options. The limit is $5000. So for example if you put down $2,500 down you can get up to $5000. No strings attached.
Other First Time Buyer Grant Options
The second option that I really really like is you can actually get your closing costs included into the loan. So normally when you buy a house let's say that you're doing an FHA loan you would put 3.5% down and then your closing costs are usually about another 4% for closing, taxes and insurance, prepaid and escrow. In total that’s 7.5%. FHA loans are truly a great option for many firsttime buyers.
So if you're buying a $200,000 home you know you're gonna have to put $15,000 down. You can actually structure your deal in some cases to have the seller to pay the closing costs or they can be financed into the loan. Keep in mind FHA loans require mortgage insurance premiums. That way you don't have to pay out of pocket for the whole 7.5%. You just have to come with the 3.5% as opposed to the whole 7.5%. Be sure to get with some local mortgage lenders for proper advice. Many markets are different.
Most every lender in the country wants you to put 7.5% to 10% down for an easy deal. with us you just have to come up with the three and a half and that's it and you can get a gift from your family to make this happen. You can also pull from your 401k your retirement or have the funds on hand. As long as you have that 3.5% you can get into your home.
So don't let that be a discouragement on why you can't buy your house. There's a lot of ways on how a smart lender can structure your loan. Both to get you pre-approved so you don't have to come out of pocket with all those closing costs. When you are shopping for mortgage loans be sure to see which home buyers program are right for you.
Additional State Level First Time Buyer Grant Programs
The third option is there are different grant programs through the states that I was mentioning before that offer you know usually as high as up to $30,000 of assistance. Here are those requirements.
- 640 or higher credit score
- income typically has to be below $70,000 per year
- Must be First Time Buyer
- No Bankruptcy on record ( last 3 years depending on state )
- No Foreclosure on record ( last 3 years depending on state )
- Must document your income ( W-2, tax returns)
This money is available at the state level. It’s state run so if the state still has money and how much funds are set aside in that program. Once they run out of money then there's nothing else that's left over. Consider all payments and closing costs when choosing the right home loan program. If you are a firsttime homebuyer with student loans these programs and grants can help you buy your first home.
First Time Home Buyer Programs Grant Downsides
The downside to this program is that it does come with higher interest rates. Typically what you will find in these cases is that the interest rate is 1-1.5% higher interest rate than if you put your own 3.5% down payment. You don't want to have all your extra money being eaten up by interest that you could put instead for your family or retirement. Compare using the first time buyer grant with the downpayment assistance.
Using your own funds it makes a lot more sense. If you can scrape up just 3.5%, your mortgage payment is going to be about $300-$500 cheaper per month by getting a lower interest rate. Let's say that you buy a $200,000 home and you have to put 3.5% down. That is $7,000 down.
The other option to compare is you put you know just $2,000 down that you get the downpayment assistance, the one that is with you putting your own 3.5% down your mortgage payment is $1,500.
The second option with you just putting in $2,000 down the payment is $1800. So you're going from 1,500 to 1,800 dollars and the only difference that you're saving is 5000. Use the down payment assistance program because your payment is going be a lot higher and in the long run. That doesn't make financial sense. It makes a lot more sense if you can put your own funds down and then thereby get a lower interest rate and cheaper house.
Commit to a First Time Home Buyer Grant or Program Right For You
Whether it's a grant, tax credit or down payment assistance program. Utilized properly you can cover your closing costs, your down payment and boost your purchasing power. Don't think that just because your lender told you that you need $20,000 down or you have to have a 780 credit score. It's not true.
Many loan programs can get you a loan with a 500 credit score. So it pays to shop around. Don’t fall for a bank loan. Many times they are closed on the weekends for you to get approved. It pays to get with a local Realtor® Contact the local Realtor® below in your state.
For North Carolina Debe Maxwell, CRS
For Georgia Market contact Anita Clark
For Massachussetts market contact Barbara Todaro
Utah market contact Wanda Kubat-Nerdin - Wanda Can!
Illinois Market contact Linda Metallo DiBenardo
Florida Market contact Beth Atalay
Texas Market contact Laura Filip
Idaho Market contact Kasey & John Boles
Ohio Market contact Liz and Bill Spear
Arizona market contact Sheri Sperry - MCNE®