Houses aren't selling like Taylor Swift tickets, but there are plenty of homes for sale with falling prices, and I want to share information that can help you buy your first home. Often I write about down payment and closing cost assistance programs that you can take advantage of as a first-time buyer. Today I would like to introduce you to 3 other forms of home-buying assistance that will help you buy (or rent) a home.
- Mortgage Credit Certificates
- Matched Savings Programs
- Housing Choice Vouchers
Mortgage Credit Certificates
When trying to get approved for a government loan (FHA, HomeReady, VA, Home Possible, USDA loan) to buy a house, take advantage of a mortgage credit certificate (MCC) if it's offered. An MCC could give you a valuable tax break. When you buy a house, you can take a standard tax deduction plus save even more on your federal tax bill thanks to an MCC.
- Up to $2,000 per year in tax savings
- First-time and lower-income home buyers
- Linked to state and local government loans
- Local Housing Finance Authority (HFA) loans
Whether you're looking to take advantage of a mortgage credit certificate in Colorado, Arizona, Texas, or another U.S. state, you might wonder if a mortgage certificate is worth it. With an MCC, you could save up to $2,000 on your yearly taxes, so it's worth pursuing.
"Mortgage credit certificates are designed to help first-time homebuyers qualify for a home loan by reducing their tax liabilities below what they would otherwise have to pay." Investopedia
Who qualifies for a mortgage credit certificate? The MCC rules vary by program and state. Most commonly, MCCs are geared toward first-time and lower-income home buyers and those who take advantage of state and government loans. Search online for MCC options ("Mortgage Credit Certificates [your state]" or talk to your real estate agent for more information about mortgage credit certificate programs.
Matched Savings Programs
When you are a low-income individual and need money for closing costs or a down payment on a house, you may be eligible for a Matched Savings Account or Individual Development Account (IDA). Depending on the organization or institution offering the matched savings program, the match may be dollar-for-dollar or up to eight-to-one-dollar. These programs provide a quick alternative to saving money as you prepare to purchase a house.
IDAs will match every $1 you save with $5 (may vary by state). That means you could save $2,000 toward closing costs on a house by gradually contributing $400 of your own money. Save $2,000 of your own money, and you'll end up with $10,000 in your IDA account that you can use to purchase a home. You'll feel like one of those super couponers who save big when they check out at the grocery store!
- Incentives to save money
- Learn money management skills
- Develop personal financial goals
Depending on your state, you'll complete an eligibility questionnaire to see if you qualify for a matched savings program. In some states, a certain number of applicants are approved based on funding. Other states enter you into a computerized lottery system that selects individuals based on available program slots. Again, these home-buying assistance programs vary by state, so you'll want to Google "matched savings programs [your state]" or "individual developments account [your state]" to see what's available in your area.
Housing Choice Vouchers
Housing choice vouchers differ from the other programs mentioned in this article, as they apply to renting, not owning a home. Low- or very-low-income individuals and families who want decent, affordable housing can apply for the housing choice voucher program.
Single-family homes, apartments, and townhomes typically qualify under this rental-assistance program. Administered through your local Public Housing Agency (PHA), your housing voucher entitles you to pay 30% of your gross income towards rent. The voucher covers any remaining rent balance. When you receive a voucher, you will be responsible for finding housing within 60-120 days (may vary by state), and the landlord must agree to accept the voucher as payment.
If your gross income is $1,000/month, you will pay $300 (30%) towards rent, and the housing choice voucher will cover the rest. If the most affordable apartment you can find is $500/month, your landlord would have to agree to accept a $200 voucher.
- Reduce poverty
- Provide affordable, stable, & safe housing
- Improve housing choices for very-low-income families
To find a Housing Choice Voucher application in your area, Google "Housing Choice Voucher [your state]" or "Housing Choice Vouchers programs near you ."You can also contact your local public housing agency to apply for a housing choice voucher.
Conclusion
Most of these alternative home buyer and rental assistance programs offer financial education courses that enable you to make better-informed decisions about saving money and building assets beyond the programs. These financial assistance alternatives make home buying and renting more affordable and get you into a house sooner rather than later. It’s always a good idea to talk to a mortgage broker and a local real estate agent when you’re ready to buy a house. By the way, Zillow might not tell you about these programs, but they provide a variety of eligibility options on their listings.
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