Washington DC has become one of the most expensive markets in the entire country to purchase a home. Although it can be costly to live in the DC metro area, it offers high-incomes, low unemployment rates and a great quality of life with tons of things do. So to own a home in this area is a smart investment and will stabilize your housing expenses for years to come.
However, the most challenging step for most home buyers in this area is saving enough money for a down payment. It can be really challenging here in DC where most properties are priced over $350,000 often requiring a minimum down payment of 3% of at least $10,500.
With all this being said, fortunately, there are a number of programs to help home buyers reach their goal of home ownership. Regardless if the program is funded by a nonprofit organization, state housing finance agencies, or financial institutions with special first mortgage products, there are many programs out there that most prospective buyers just don’t know about. In fact, most real estate agents and many lenders are not even aware of many of these programs.
Some require buyers to repay a portion of the help they received when they purchased their home, while others don’t. Some programs have a slightly higher interest rate than the average market rate. And several programs require you to live in a certain area or be a local government employee.
Which home buyer program might work for you?
D.C. First-Time Homebuyer Programs
Home Purchase Assistance Program (HPAP)
Administered by the DC Department of Housing and Community Development, this program provides financing assistance up to $50,000 and closing cost assistance of $4,000 for first-time buyers in DC.
Funding ranges from $10,000 to $80,000, depending on your household income.
With the goal of making sure the payments are not an additional burden on the borrowers, HPAP assistance offers 40-year loans, with payments deferred for the first five years.
There are additional perks for city employees, including deferred loans for up to $10,000 and closing cost assistance up to $1,500.
DC Open Doors
This program is dynamic as it is available to all home buyers as long as you don’t own a home at the time of purchase. That means you do not have to be a first-time home buyer. Plus this program allows you a household income up to $140,000. It covers your 3.5% down payment with FHA financing allowing you to buy a home up to $483,000.
We can help guide you through the process of buying using the DC Open Doors program. You must have a minimum credit score of 640 and must work with an approved DC Open Doors Lender. We have helped countless clients take advantage of this program over the last five years including buying multifamily properties. This strategy allows you to live in one unit while renting the other units to offset your rent.
The program is open to all applicants who:
Don’t currently own a home.
Are buying a home in the District, and
Have an individual borrower income that’s no more than $140,640.
If you prefer to make a down payment, you can also take advantage of low-interest loans with lower mortgage-insurance requirements – and they’ve all been vetted by the DCHFA.
There are currently six different loan programs with and without down payment assistance. The down payment assistance is up to 3 percent or 3.5 percent depending on the loan program, so that buyers can have 100 percent financing if needed.
The second mortgage for the down payment is fully forgivable after five years. (This second loan can be used for closing costs).
Mortgage Credit Certificate
Launched in 2016, this program allows eligible first-time buyers to use 20 percent of the mortgage interest they paid as a credit against the balance they owe on their income taxes.
Here’s how it works: let’s say you owe $5,000 in income taxes and paid $10,000 in mortgage interest. You would be able to claim a credit of $2,000 and pay just $3,000 in taxes.
The maximum household income to qualify for the tax credit is $164,080 for a household with three or more people.
Maryland First-Time Homebuyer Programs
Maryland SmartBuy 2.0
This amazing program is not very well known but can be a tremendous benefit for individuals with college debt who want to transition into home ownership. This program basically works by simultaneously paying off college debt while purchasing a home through the Maryland Mortgage Program financing discussed below. A qualifying homebuyer can purchase a home through the Maryland Mortgage Program, and use up to 15% of the value of the home (up to $40,000) to pay off their student debt while still counting toward their new home. In addition, Maryland SmartBuy 2.0 allows you to purchase any home in Maryland that meets the Maryland Mortgage Program guidelines unlike version 1.0 that limited you to ready-to-move-in homes owned by the state and program. The program can bring up to $40,000 in student debt relief.
To qualify for Maryland SmartBuy 2.0 program, homebuyers must have an existing student debt with a minimum balance of $1,000.
This is a great opportunity for first-time homebuyers who have been scared into transitioning into ownership due to college debt. Take a look at Maryland Homes For Sale, to see all the current homes available.
Maryland Mortgage Program
This popular program provides a 30-year, fixed-rate deferred payment loan at 0 percent interest to cover down payment and closing costs up to 5 percent of the purchase price. It helps to think of it almost like a grant – you’ll only repay it when you sell or refinance your home.
The program also includes a low-interest first loan. Household Income limits in Maryland range from $92,500 up to $154,420, depending on property location and household size
At least one of the buyers must be a “first-time” home buyer – in this case, that means someone who hasn’t owned a home in the previous three years.
Mortgage Credit Certificate
Home buyers are able to take an income tax credit up to a maximum of $2,000 of the mortgage interest paid on their loans through the Maryland mortgage program.
Virginia First-Time Homebuyer Programs
VHDA Down Payment Grant
In Northern Virginia, first-time buyers with a maximum income of $97,520 for a household of one or two people, or $113,840 for a household with three or more people, can qualify for a down payment grant of 3 percent or 3.5 percent of the home price. The maximum home price to qualify for the grant is $500,000.
In Northern Virginia, many first-time home buyers opt for a Fannie Mae loan with a 3 percent down payment requirement and no mortgage insurance. Borrowers need to have a FICO score of 660 or above and, need to demonstrate that they can repay the loan.
VHDA FHA Plus
Are you a first-time buyer who doesn’t qualify for the grant program? You may be eligible for an FHA Plus loan, which provides a down payment of 3 to 5 percent in the form of a second mortgage loan which is repaid over 30 years at a low-interest rate.
The maximum income for FHA Plus in Northern Virginia is $125,700 for a household with one or two people or $146,700 for a household with three or more people. The maximum eligible home price is $500,000.
VHDA mortgage tax credit certificate
If you’re a first-time Virginia home buyer who used VHDA loan program to purchase your home and you meet the income and home price criteria of the FHA Plus program, you’re are eligible for a mortgage credit certificate.
This tax credit can be used for the entire time the borrowers keep the loan. It also gives them a credit — which is better than a deduction — on their federal income taxes for the first 20 percent of the mortgage interest they pay. They can still take a deduction on the other 80 percent of the mortgage interest paid. Because you can only use this credit if you have an actual tax liability, many higher-income borrowers in Northern Virginia are able to use this credit.
Too often, money issues stand in the way of first-time homeownership. A recent survey found that 80 percent of millennial renters want to buy a home, but most say they can’t afford to. With these first-time home buyer programs in your arsenal, you won’t have to be one of them.
Let the DC Urban Life Team Help
Attempting to figure out which program best fits your needs and if you meet qualification requirements can be confusing and stressful. The DC Urban Life Team has an amazing group of loan officers and lending partners that can help answer any and all of your questions to figure out your best options with absolutely no strings attached. Reach out to us today to schedule a free consultation time to talk about the process and come up with a plan to help make you a homeowner. 202-520-1819