Raising money for a down payment, particularly in Washington D.C. and the surrounding area, is expensive. This is especially true in metropolitan areas where home prices tend to be more expensive. Finding money for a down payment is the single biggest obstacle for first time home buyers when looking to purchase a home.
Not to fear. There are nationwide and local financing programs available for first-time buyers that make purchasing a home more affordable, including those which require little or no down payment.
NATIONWIDE LOAN PROGRAMS
These loans are offered by the Federal Housing Association. The credit requirements for those seeking FHA loans are not as stringent as those for conventional loans. Also, the prospective homeowner can expect to pay as little as 3.5% of the contract price of the home as a down payment.
For eligible active duty personnel, veterans, and eligible spouses, VA loans are a viable alternative. These VA-insured loans require no down payment. Loans are not subject to mortgage insurance paid with other loan products where the down payment is less than 20%.
For those who live in a government approved rural area the Rural Housing Service backs a mortgage that offers no down payment.
In addition to these nationwide programs, there are other mortgage options for those local to Washington D.C. and the surrounding area.
WASHINGTON D.C. AND SURROUNDING AREAS
Virginia Loan Programs
FHA Plus Loan
For borrowers who need additional down payment assistance, the FHA Plus Loan is another option. Depending on creditworthiness, the borrower can qualify for a second mortgage of between 3 and 3.5% of the contract price to cover the down payment and closing costs. It is important to note that the combined mortgages may not exceed the FHA purchase price limitations.
VHDA Down Payment Grant
For Northern Virginia residents meeting credit worthiness and maximum income standards, VHDA offers down payment grants equivalent to 3 to 3.5% of the home’s purchase price.
VHDA Mortgage Tax Certificate
Homeowners who qualify for VHDA’s loan programs and who meet the income and eligibility requirements of the FHA Plus program will receive a gift from Uncle Sam at tax time. The VHDA offers a mortgage credit certificate which allows for a 20% tax credit for the mortgage interest paid on their loan for the duration of the loan.
Maryland Loan Programs
Mortgage Credit Certificate
This program is similar to its Virginia counterpart but is limited to a total credit of $2,000.
Maryland Mortgage Program
This program offers a 30-year fixed rate loan at 0 percent interest. This loan allows perspective buyers to cover up to 5 percent of the purchase price for down payment and closing costs. The loan does not require repayment until the end of the 30-year term unless the home is sold or refinanced.
The mortgage covering the remaining purchase price of the home is subject to both income restrictions as well as limitations on the purchase price of the home.
WASHINGTON D.C. LOAN PROGRAMS
Mortgage Credit Certificate
Similar to the Virginia and Maryland programs, D.C. homeowners may take a credit of 20% of the mortgage paid on their loan for the duration of the loan.
Home Purchase Assistance Program
First time home buyers who are DC residents may be eligible for assistance of between $10,000 and $50,000 of the purchase price of their homes, subject to income limitations and credit worthiness. An additional $4,000 in closing cost assistance is also available.
The payments on the 40-year loan are deferred for five years to reduce the burden the loan may have on the home buyer.
DC Open Doors
For those looking for a home in Washington D.C., regardless of current residency, the DC Open Doors Program offers down payment assistance to applicants who meet the minimum credit requirements and do not exceed income limitations outlined by the program.
The DCHFA (DC Housing Finance Agency) will pay the down payment of 3 to 3.5% of the home purchase price. The 0% loan is forgiven over a five-year period at a rate of 20% annually. The loan becomes repayable in instances where the home is refinanced or sold during the five-year term.
First time home buyers have numerous options when it comes to financing a new home. To see if you qualify for home buying assistance and to check out more D.C. area downpayment and home buying assistance options visit our Buyers Assistance page. Keller Williams can assist you in find the appropriate program for your circumstance. Feel free to contact the Tania Ivey Home Selling Team for more information. (703) 661-9410.