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First Time Home Buyer Incentives

Posted by Brad Pauly on Tuesday, November 24th, 2015 at 8:35am.

girl staring out of rainy window

 

Since first time home buyers tend to be buying a house with less startup capital than others, the government and lenders have to offer incentives to keep the housing market alive. First time buyers can enjoy tax incentives, down payment assistance, and grants that make monthly payments less of a burden.

 

Tax Incentives

The bad news: The First Time Home Buyer's Tax Credit is no longer valid as of 2010. The good news: There are still plenty of tax incentives for first time buyers that will help offset the cost of buying a home.

Property Tax Deduction

This is a deduction to the amount of your taxable income that varies based on how valuable your house is. You can deduct the amount of property tax you pay to the state or local area from your federal taxes in full. In most cases, you can find your total property tax bill in an invoice sent to you by the state. Check with your mortgage company if you are unsure.

Mortgage Interest Deduction

Lenders will send a 1098 form around January to mortgage holders. It contains information about how much interest they have paid over the course of the tax year. Interest on mortgages accrues faster than the interest on most other loans. That includes big bills like credit cards and student loans. Deducting mortgage interest from taxes can save enormous amounts of money.

Mortgage Fees Deduction

For first time home buyers, the fees paid to get a mortgage can be deducted from taxable income. Those who are refinancing their mortgage can also benefit from the deduction, but the total deducted will differ.

 

Down Payment Assistance

Some states offer down payment assistance programs that will help lower your monthly mortgage costs. Help with down payments will offset or cover the cost of a large down payment. The remaining principal on your home loan will lower.

My First Texas Home

Also known as TMP 79 DPA Plus, My First Texas Home is a loan and down payment assistance program for potential texas homeowners. It is an upgrade of the TMP 79. As of 2015, the program introduced the down payment assistance option. First time purchasers looking to buy a house can receive up to 5% of the value of the home toward a down payment. They will be provided with a 30 year fixed-rate mortgage. The program also offers help for a down payment on homes for up to $8000.

Federal Housing Administration (FHA) Loans

The FHA offers affordable loans for those who need financial assistance and don't have much capital. Down payments on FHA loans can be as low as 3.5% of the home's value. You don't need exceptional credit to qualify for an FHA loan. Closing costs are reduced thanks to loan insurance provided by the US government.

Energy Efficient Mortgage Program (EEM)

Save even more with the Energy Efficient Mortgage Program. The Department of Housing and Urban Development (HUD) offers an add-on to your mortgage that allows you to pay for and install energy efficient appliances and utilities. The reduced cost of living will pay for the cost of utilities. You will be able to pay off your mortgage faster. It benefits both you and your lender equally. See HUD’s Energy Action Plan and Energy Efficient Mortgages to learn if you qualify and how to apply.

 

First Time Home Buyer Secrets

HUD Grant Assistance

Are you a first time home buyer with special circumstances? The Department of Housing and Urban Development may have incentives available to help you buy a house. Organizations have the greatest chance of acquiring a grant from HUD. However, a good part of their money has also been set aside for first time home buyers.

Down Payment via IRA

If you have a traditional or Roth IRA (Individual Retirement Account), you can make a one-time early withdrawal of up to $10,000 without worrying about the 10% penalty. If you're a member of a married couple, both you and your spouse can access these funds together and withdraw $20,000 without consequence. The withdrawal must be used within 120 days to avoid the 10% penalty.

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