Buying a home may save you hundreds of dollars each month when compared to renting. If you’re ready to buy your first home, market conditions can help you along in this effort. There are also a number of first-time homebuyer programs specifically offered to help you make a purchase. Eligibility for these programs varies depending on income, location and property types.
Several federal loan programs assist first-time homebuyers by providing special interest rates and low or no down payments. The Zero Downpayment Act eliminates the down payment requirement for qualified first-time homebuyers who purchase homes with FHA-insured mortgages. The American Dream Downpayment Assistance Initiative distributes $200 million annually for down payment assistance for eligible first-time homebuyers. And, if you buy a fixer upper, the FHA 203(k) rehabilitation loan provides special low-interest financing to help you restore home to move-in condition.
State and Local Programs
In addition to the federal programs, states provide benefits to help you purchase a first residence. The Mortgage Revenue Bond program offers low interest rates and financing up to 100 percent of your purchase price. Contact your local government, nonprofit housing agency or lender to find out which area organizations offer these down payment assistance programs to reduce your out-of-pocket closing costs.
As a first-time homebuyer, you can deduct the discount points applied to bring down your mortgage interest rate. You also can deduct the mortgage interest you pay throughout the year. Property taxes qualify as a tax deduction, however local tax refunds may reduce your deduction. Some states also offer the Mortgage Credit Certificate that gives you an ongoing federal tax credit.
Overall Benefits of Homeownership
Beyond the immediate incentives available to first-time buyers, homeownership brings benefits such as appreciation, equity and stability. Although appreciation isn't a guarantee, historically, homes have proven to be a good long-term investment. As your home's value rises, your debt decreases, building equity that you can use as collateral for other loans; equity may result in a profit if you sell your home. And, owning a home is the first step to building long-term stability in your community.
- New York Times: Home Sales Rose in 2012 to 5-Year High
- Trulia Blog: Buying A Home is 45 Percent Cheaper Than Renting
- Home Loan Learning Center: Special Programs fro Home Buyers
- First Home Advisor: Learn about local first-time homebuyer loan, tax credit, and down payment assistance programs in your state!
- Realtor: Home Sweet Home Shelter from Taxes
- Kiplinger: 6 Good Reasons to Buy a Home Now
Gwen Carrington is a marketing professional with experience in strategic brand management, consumer marketing, business-to-business marketing and communications management. She has held lead marketing roles in a variety of industries, including fine jewelry, new homes and technology.