Making the decision to purchase your first home is a big one, and luckily for you, there are a few incentives available to first time home buyers. You’ll learn a lot simply by going through the home buying process, but you’ll want to make sure your mortgage lender knows you’re purchasing your first home or real estate property so he or she can help you take advantage of these incentives.
Mortgage Loan Options
Certain mortgage loans will allow first time home buyers to make lower down payments (than the often-recommended 20 percent) or use alternative credit. Some of the loans with low down payment requirements include:
- Federal Housing Administration (FHA) Loans – These government guaranteed loans have a 3.5% down payment requirement and more lenient credit guidelines.
- Community Reinvestment Act (CRA) Loans – With CRA loans, borrowers must meet certain location and income requirements, but those who qualify receive only a 3% down payment requirement
- Conventional Loans – Some conventional loans enable buyers to put down 3-5%, depending on the specific loan type.
Always discuss which loan options work best for your situation with your mortgage loan officer, and be sure to ask if you qualify for the loans listed above. Learn more about down payment requirements in my previous post.
Down Payment Assistance Programs
A variety of organizations today are creating programs to help encourage people to buy their first homes. These often come in the form of down payment or closing cost assistance. A few of the programs currently available in Iowa include:
Other Benefits of Homeownership
While only first time home buyers are usually eligible for the some of the loan and down payment assistance options described earlier, there are some benefits that every homeowner receives. These include:
- Tax incentives – Did you know that homeowners can receive multiple tax deductions for things like mortgage interest payments and property taxes? It’s true! For example, a new Iowa state law establishes an income tax credit for people saving for their first home. Consult your tax advisor to learn more.
- Building equity – One of the nice things about paying a mortgage rather than rent is that your home is helping you build equity. Having equity, especially in a home, opens doors when you’re looking for credit solutions. For example, home equity loans and lines of credit let you borrow money against the value of your home.
- Home improvement opportunities – Whether you’re an HGTV star in the making or simply enjoy planting and maintaining a garden, homeownership provides many opportunities to make a house your own.
- Pride of ownership – Of course, one of the benefits of owning a home is the pride that comes with knowing you’ve accomplished what many consider a major milestone or life event. Buying your first home is a big deal and definitely a reason to celebrate.