Many homebuyers do not realize how much help their very own state has to offer them when buying their first home of their own. The following are examples of the first-time homebuyer programs that most states offer such as home loan, tax credit, education, and grant programs.
Mortgage Revenue Bond "State Bond Loan" Programs
One of the best programs available throughout the United States is a Mortgage Revenue Bond (MRB) program, also known as a "State Bond" loan. Through these state-sponsored home loan programs, eligible homebuyers can obtain a below-market interest rate from their local Housing Finance Agency (HFA). They can be paired with and FHA, USDA, or Conventional loan.
In general, to qualify for a state bond loan you must:
- not have owned a home in the past three years (unless in a target area)
- meet the applicable income limits which vary by county
- purchase a home that is below the county's purchase price limit
- continue to occupy the home for as long as they keep the loan
While other restrictions apply and vary by state, these are the main requirements to qualify for the state bond loans in any of the 50 states. To continue benefitting from the below-market rate loan, you must occupy the property as your primary residence and if you sell it in the first nine years and your income has gone up substantially (more than 5% a year over the maximum limits) you may be required to pay a federal recapture tax to the Internal Revenue Service (IRS).
This home loan program is available in every state and it can be paired with FHA, VA, USDA and Conventional home loans products.
Learn more about the great home loan programs available from your state by clicking on the appropriate link on the left side of this page. The actual mortgage rates being offered vary and depend on current financial conditions. For this reason the rates offered by your state may be more, or less, beneficial to you. For that reason it is important to shop and compare your financing options carefully before making a final decision.
Down Payment Assistance Programs
One of the biggest challenges for most first-time homebuyers is coming up with enough cash to cover the required down payment and closing costs.
The required cash to close can really add up. For example, with an FHA loan you may need to come up with 3.5% of the purchase price for a down payment and a few more thousand dollars for closing costs.
Fortunately, to help lower the amount of cash you need to buy a home, your state, city, county or non-profit housing agencies may offer a Down Payment Assistance Program (DAP). DAPs can significantly lower the amount of cash you need to have saved in order to purchase a home, as well as, lower your ongoing house payment to make homeownership affordable.
To qualify for these program typically the households must:
- meet specific income limits
- must not have owned and occupied a home in the past three years
- must meet all other applicable program requirements
To see if your local housing agency offers a down payment assistance program in your area click on your state on the left side of this page.
Mortgage Credit Certificate (MCC) Program
As an alternative to the State Bond Loan program, a few, but not all, of the state housing finance agencies also offer a federal tax credit from the IRS known as the Mortgage Credit Certificate (MCC) Program. The states that do offer the MCC program have an "*" after their name.
In addition to these states, some cities and counties also offer the program throughout the United States, so it is worth asking your local housing agency about the program as well.
The MCC program offers income-eligible first-time homebuyers an ongoing federal tax credit. While the precise amount of the tax credit varies by program administrator, the program provides eligible homebuyers a dollar for dollar reduction in their federal tax liability for as long as 30 years!
In general to qualify for the MCC program, a borrower must also meet the following requirements:
- must not have owned and occupied a home in the past three years (unless buying in a target area)
- must meet the applicable income limits which vary by county
- must purchase a home that is below the county's purchase price limit
- must continue to occupy the home and keep the loan to claim the credit
Other restrictions apply and vary by the state, city and county who administer the program.
To claim the MCC tax credit you must occupy the property as your home (primary residence). Also if you sell the home it in the first nine years and your income has gone up substantially (more than 5% a year over the maximum limits) you may be required to pay a federal recapture tax to the Internal Revenue Service (IRS). Check with your state and your lender for details.