How Buyers can Reduce Their Home Costs

 

In Hampton Roads, programs exist where eligible buyers can get as little as 0% interest, up to $40,000 in down payment assistance, 50% off a home, 38 year loans, options for no down payment for homes up to $1,000,000, “credit score not considered,” virtually no money down rehab loans, and otherwise. The programs (only a small minority of which are referenced below) include some with no income limits, including one to help people acquire homes up to $1,000,000. Want to build a house but don’t have 20% down? How about building a house with only 3.5% down, or if you are a VA buyer, 0% down? All are options for qualified buyers meeting various program-specific criteria. While many programs are restricted to 1st time home buyers (those who have not owned a home in the past 3 years), a number of programs and not restricted to 1st time home buyers and some programs can yield savings even for properties over $1,000,000. 
 

Did you know that a lender is actually not the best person to ask about programs to reduce your home costs? Here's why: lenders are not able to work with every program. On the other hand, that does not limit agents nearly as much. When I bought a house in the past year at the time of this writing, I was pre-approved with 4 lenders, only 2 of which were able to do the particular programs that I used. I inquired from at least one other lender who was not able to use those programs. On another occasion, I sent a buyer to 5 lenders, and only 1 of them could preapprove her. Later I found that no lenders I knew were able to do the program that she used which saved her even more money than going with the 1 lender I knew who could pre-approve her. She acquired a 1% interest, no downpayment 37-year loan. I know about so many programs to reduce your home cost through governments, banks, non-profits, etc. that I am willing to pay you $100 if you happen to locate any resource that has more programs that I have in my list (without you copying my list and locating some more to add to it that is!). Here are just a small fraction of those programs that are the tip of the iceberg of the list that I have compiled over the years.

 

Tax Deductions:

Many who have never purchased a home have never had a good reason to itemize deductions. The moment that most buyers purchase a home, most have a very good reason to itemize. Don't know much about itemizing deductions? Check out this article here that gives an overview. See an approximation of how much you can save here. You can deduct both the real estate tax and the interest usually, as you can see detailed on the IRS site here

 

While there are plenty of ways to reduce home costs, whether by buying a home that needs some TLC that you can do yourself, or by using a direct USDA loan for the few who qualify for a 1% interest no money down loan, there are a few programs that I'd like to focus on.

 

To see how to minimize taxes when passing a home to your children, click here

 

VHDA Mortgage Credit Certificate

This program, through VHDA, is almost like the VA government subsidizing your house payment $100-$250 a month initially (for homes with loans of 150k-375k respectively, although you can still use the program for homes under 150k), a number which decreases very gradually through the life of your loan as you live in the house and are paying less and less a month in interest through normal mortgage payments.

By the numbers:

With this program, you get 20% of the interest you pay each year credited back to you in taxes at the end of the year, in addition to the remaining 80% still being eligible for the usual tax deductions.

Max sales price: $375,000.

Income limits: 

2 or fewer people: $80,400

3 or more people: $93,800

Keep in mind that this program is for "first time home buyers." That is someone who has not owned a home in the past three years, etc., so if you owned one four years ago, you may still be eligible. If you are not a first time buyer, there are certain federally targeted areas where you can still utilize this program, whether in depressed areas like the East End of Newport News, or areas in high demand like the City Center of Oyster Point. See Federal Targeted Areas in parts of Newport News, Hampton, and parts of the South Side here where those who have owned a home in the past 3 years can still qualify for the program. 

See the VHDA site's description of it here

See program limits and restrictions  regarding the max sales price here and the income limits here.

Taken Together

Rates are near historical lows, and the MCC in a way takes those rates lower than they’ve ever gone before. Combined with a market that’s not inflated in this area, you have a phenomenal combination.

USDA Direct Loan - As low as 1% interest & no down payment in rural areas for low income buyers including Gloucester, Smithfield, parts of James City & York County.  

Locations include parts of NW York County, James City County, Williamsburg, Toano, Smithfield, Surry, and Isle of Wight. For eligible property areas, go here. and click “Single Family Housing” under “Property Eligibility.” The first person I ever referred to a USDA direct loan qualified. Owner occupancy required throughout lifetime of loan. Income must be at or below the following as of 9/28/15 for Hampton Roads area direct loans. Sometimes those with credit scores below 580 under extenuating circumstances such as a medical emergency or other temporary hardship may qualify, as you can see here

USDA Direct Loans max purchase prices on pages 83 & 84 (217,000 in James City County, 221,200 in York County, 209,300 in Gloucester, etc.):

USDA Direct loans max income:

1 person household: 41050

2 person: 46,900

3 person: 52,800

4 person: 58,650

5 person: 63,350

6 person: 68,050

7 person: 72,750

8 person: 77,400   

 

USDA “guaranteed” loans have much higher income qualifications, with the usual interest with no down payment for buyers of incomes $84,300-$111,300 for homes of 1-8.

Here are some of the eligible properties in a search I ran in Fall of 2015.

 

Down Payment Assistance (DPA) program by the Virginia Department of Housing and Community Development

Closing cost assistance by lender up to 2500 & up to 20% down payment assistance (10% in Hampton Roads). Cannot be rented out.

Income limits as of Sep 2015:  

1 person household: 41100

2 person: 46950

3 person: 52800

4 person: 58,650

5 person: 63,350

6 person: 68,050

7 person: 72,750

8 person: 77450   

See also this link

FHA Plus Loan - Gov. Subsidized 2nd Mortgage that’s a bit pricey but gives those who can’t afford a down payment a chance. Also, relatively easy to qualify for.

Max sales price: $375,000.

Income limits: 

2 or fewer people: $80,400

3 or more people: $93,800

 

See more opportunities with the VHDA, including excellent interest rates & low income opportunities, here.

Navy Federal 100% Financing Mortgages:

No down payment required on 100% financed loans ($1,000,000 max!!!)

While it's a great program, individual lenders with Navy Federal can be unresponsive and otherwise problematic. Multiple buyers I’ve helped have had very bad experiences with them & they have a poor reputation among many real estate agents. 

There are certain credit requirements for most programs. If credit is a concern for you, keep in mind that I help others credit for free who want to buy a home, and I can put you in contact with lenders who have a higher level of expertise than I do who also help others' credit for free when considering a mortgage loan. For more on improving your credit, see my credit page here.    

Chart Courtesy Zillow.com

 

For more programs that lower interest rates (as low as 0%) and provide as much as $40,000 in down payment assistance, contact me directly. While most programs have income limits, some do not. There's even an option where "credit score (is) not considered." I also have options for subsidized rent, even though I recommend the homeownership options over the subsidized rentals for most due to cost short term and long term if you're able to use the homeownership programs. 

 

For a personalized report of your home cost reduction options, click here

 

If you are homeless or low income, my site for it here may be of use.