Mortgages
State programs can help you buy a home
State programs geared toward first-time home buyers are offering good deals on mortgages that you might not find offered anywhere else.
For example, the West Virginia Housing Development Fund touts a 30-year, fixed-rate loan for 2.99%. (Its website boasts: "Unprecedented!") The Louisiana Housing Finance Agency has 30-year FHA or VA loans for 2.95%.
That's more than a percentage point less than the average cost for a 30-year mortgage.
Of course, you'll have to meet certain income or house price limits to qualify, but that's pretty standard for programs geared toward helping low- and moderate-income folks buy homes.
These state programs can lower monthly payments, provide cash for down payments and closing costs, and generally make the numbers work for you.
Most are limited to buyers who haven't owned a primary residence for three years, unless they are buying in targeted areas. You'll need a steady income and a decent credit score, too.
Applying isn't any more difficult or time-consuming than applying for a conventional mortgage. Many of the programs work through networks of private lenders.
Here's the kind of help you can expect to find:
Loans with below-market or at least competitive interest rates. These generally are 30-year, fixed-rate loans. Most have income caps, and some have caps on the purchase price of the home.
Help with down payments and closing costs. Amounts vary, and there generally are income caps and other restrictions. But in some cases, these loans never have to be repaid if you live in the home long enough.
Loans toward the purchase or repair of homes. Massachusetts, for example, offers purchase and rehabilitation loans to cover 97% of the purchase price plus rehabilitation costs or the estimated value of the home after rehabilitation, whichever is less.
Borrowers need a 3% down payment, and they must meet income and purchase price requirements. New York has a similar program but requires only a 1% cash contribution from borrowers.
Tax credit programs. Mortgage Credit Certificates allow qualified applicants to claim 20% to 30% of the interest they pay each year as a federal tax credit. That credit is subtracted from the amount a homeowner owes in income taxes, up to a maximum of $2,000.
The remaining interest still qualifies for the standard mortgage deduction, which is subtracted from a homeowner's taxable income.
Help for public-sector employees, people with special needs and others. Not every state offers this kind of loan assistance, but some have special mortgage loan programs for teachers, police officers and fire fighters, state and municipal workers, people with disabilities, health care workers, veterans and active-duty servicemen and women.
North Dakota includes single-parent households in the mix. Nevada is offering a loan payment subsidy for teachers that can amount to $15,000 over five years.
Ohio has a Grants for Grads program geared toward helping recent high school or college grads put down roots. The grants are for 2.5% of the purchase price in the form of a 0% interest loan that is forgivable after five years. (But if you move before then, you'll have to pay back all or part of the loan.)
North Dakota's Roots program targets new arrivals and Dakotans who have left the state more than a year ago but want to return.
A few states have additional enticements:
- Mississippi's Home Loan Plus program offers grants of up to $14,999 to qualified low-income buyers in certain areas.
- New York is partnering with builders and energy groups to offer incentives to purchasers of new, Energy Star-labeled homes. Interest rates are 0.375% lower, with no points or origination fees, and there's a 240-day rate lock. You can get down payment assistance of $3,000 or 3% of the purchase price up to $15,000.
- Ohio's New Home Sweet Home program offers first-time buyers of new homes a rate lock of up to 180 days while the builder finishes construction. The interest rate is set 0.25% higher than the standard rate.
- South Carolina's extended-lock program for new construction goes for 180 days with the option of a 90-day extension and allows borrowers a one-time "float down" to the current interest rate before the closing date.
- Tennessee's New Start program is aimed at helping low- and very-low-income buyers afford newly built homes. It works through partnerships with nonprofits.
- Washington state's A New Home for You pilot program offers fixed-rate, new-construction loans for first-time buyers with credit scores of 680 or above.
These programs aren't for everyone, but it's smart to investigate what's available, especially if you've had credit problems.
Start by checking to see what your state offers.
Here's where to find links to state first-time home buyer programs.
Remember -- these programs can change, so it's wise to check the websites periodically for updates.
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