DC Offers Assistance to Homebuyers, Too

As state governments try to bolster their housing market, new credit incentives and housing assistance programs are emerging left and right.  These go along with the federal first-time homebuyer’s tax credit, and usually give priority to state residents.  This past weekend Bob Tedeschi wrote in the NY Times about the new program offered by the state of New York, through which the first 20% of the mortgage interest paid each year for a new home can be applied as a credit in state income taxes, while the remaining 80% can still be deducted from federal income taxes.  There are household income limits for eligibility.

Washington, DC has had a Housing Purchase Assistance Program (HPAP) for several years now, providing financial assistance to first time homebuyers upfront rather than only upon filing 2009 income taxes next year or amending 2008 returns, though the process may be as cumbersome as the tax-related ones.  The DC HPAP provides interest-free or low-interest loans (the mix between the two is determined by the loan amount and the applicant’s income level) to help first time homebuyers in the District with down payment and closing costs.  Priority is given to low-income, elderly, handicapped, disabled, or displaced residents, but other District residents (having lived in DC for one year prior) are also eligible for the assistance.  Applicants must be household heads who have not owned real estate in the last 3 years, have a good credit rating, and are purchasing a home within the District.  Non-residents who have been employed in DC throughout the previous 12 months or who have lived in the District for any 3 years as an adult may also apply.

The amount disbursed under the HPAP depends on the applicant’s income and household size as well as on the size of the mortgage and total funds available for the program, but is capped at $70,000 for down payment and the lesser of 4% of the purchase price and $7,000 for closing costs.  Support declines with income, but applicants are only required to match by 50% any disbursement over $3,000 and $500 for disbursements below that amount.  An individual who earns $45,500, for example, is eligible for a maximum assistance of $53,700 and a family of 4 with a household income of $80,750 can receive up to $22,850 (click here for the full matrix of household incomes and maximum assistance values).  Individuals with incomes of up to $58,800 (higher for larger households, up to $89,250 for a 6-person household) are eligible for the down payment assistance, and closing cost assistance is available to individuals with incomes of less than $72,801 (again, higher for larger households, up to $110,450 for an 8-person household).

Under the DC HPAP, no repayments are required over the first five years of the loan, and, after that, borrowers have 40 years for repayment, unless the borrower transfers or refinances the property or it is no longer his/her primary place of residence, in which case to whole loan amount is due immediately. The DC Department of Housing and Community Development accepts applications for the program through partner community-based organizations.

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