Homebuyer Incentives

In an earlier post (The First Steps-Plan Ahead-March 5, 2009) I mentioned first time homebuyer incentives. I was asked a few questions about how these work and want to answer those questions.

Question: So what are Homebuyer Incentives?

Homebuyer incentives come in many shapes and forms. Incentives that assist potential homebuyers can be provided by city, state and federal agencies, the property developer, the lender or even the seller of the home in the form of discounts, credits or renovation allowances, just to name a few.

Many times these agencies offer seminars or classes where you pay a small fee to learn about the available programs. They outline the application process, guidelines and requirements needed to qualify for the incentive. If you meet the program requirements, you can utilize the applicable incentives toward the purchase of a new or existing home.

Question: So once you get qualified for the program, is there an expiration? Do you have to purchase a home within a year or certain time period?

Well that depends on the program. Programs vary as do the requirements and qualifying guidelines. There can be time restrictions or programs based on availability. For example a Federal Housing Tax credit of up to $8,000 is now available for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.

Question: Are those incentive programs only good for those particular areas or can the classes be transferred to another program/area?

Most incentive programs have very specific areas in which you must purchase your home, and though the transfer of incentives to other areas is limited by the guidelines of each program, many time you are able to use one program in conjunction with other programs you qualify for.

If you are a law enforcement officer, teacher or firefighters/emergency medical technician you can take advantage of HUD's Good Neighbor Next Door Sales Program. HUD offers a substantial incentive in the form of a discount of 50% from the list price of the home. Now there is a catch! In return you must commit to live in the property for 36 months as your sole residence and many of the homes available are in communities that the city is trying to redevelop or revitalize. If you don't like any of the homes in the revitalization areas then you can't apply the incentive to non-HUD homes!

In another example, The Long Beach Housing Development Company, offers a second mortgage program for low to moderate-income homebuyers, but the homes for sale are in 4 distinct redevelopment areas. You are able to use CalHFA low interest rate programs with the LBHDC Home Buying Programs.

Every month the LBHDC provides Home Ownership Education seminars that will provide information on all the first-time home buying programs in the City of Long Beach. These seminars also educate you on how to select a home, find a realtor, choose a lender, and understand the financial issues involved with securing an affordable mortgage. The seminar is required in order to take advantage of the homebuyer incentives. It's worth the nominal fee (~$25) to learn about how these programs can be used by you to get into your first home!

There are many first time homebuyer incentives out there. It just takes a little time and effort to learn about and research which ones may be right for you. I have provided a list of key agencies you can research below.(I'll also list these in the sidebar under Reference Websites for Young Homebuyers) Find out about the available programs and what steps need to be taken to qualify for them. Understand the rules and guidelines...some programs require repayment of the initial incentive amount or a portion of the profits from the sell of the home.

California Housing Finance Agency (CalHFA)-
Offers low interest rate first mortgage programs and a variety of down payment assistance programs to eligible first-time homebuyers. CalHFA programs can be used with LBHDC Home Buying Programs.

• U.S. Department of Housing and Urban Development (HUD)
• The Federal Housing Administration (FHA) – which is part of HUD – insures the loan, so your lender can offer you a better deal.
• Veteran’s Administration (VA) Home Loan Program-Low interest Home Loans for eligible Veterans.
• Housing Development and Preservation (Mortgage Credit Certificate)

Hope this answers some of your questions. Feel free to post comments or additional questions if anything is unclear!