Updated: May 21
Buying a home is undeniably part and parcel of the American dream. Buying your first home is a special and meaningful experience. It is an important investment for you and your family and lays the foundation for future financial stability.
There are decisions to be made every step of your way. No pressure!
Not having all the facts, tips the process from stressful to full-blown overwhelming. Where do you start? Not at home browsing, unfortunately.
There are a handful of benefits available to first time home buyers that you should know. When armed with this knowledge you have the leeway to focus on the more personal logistics of buying your first home.
Let’s get you started on your journey.
Your 1st-time buyer grant
State-sponsored buyer grants are not only for the very low-income households, as commonly thought. So, if a down payment is your obstacle (a very common one!) it is worth looking into the Orange County Homebuyer program.
Funding obtained from this program may be used as a downpayment as well as qualified closing costs. Eligible persons could secure up to $30k in funds, by going through the following steps:
Check your credit score - it must be at least 680
Attend an accredited first-time homebuyer educational seminar. This should equip you further with those decisions, so get excited.
Make sure you fall into the specific income bracket
Choose your preferred lending institution and secure your mortgage. The Maximum housing price limit is set at $214 000
Once you have found your dream home, have the lending institution complete your request and submit it to the Orange County Housing and Community Development Division.
A 2-month residency in the Orlando Metropolitan Statistical Area with the legal right to reside permanently in the United States
This is a deferred loan and becomes repayable once you sell or rent it out to someone else. Interest depends on your lending institution. The loan becomes repayable in full when one of the following things happen:
Should you default, in the first instance.
When there is a divorce unless one of the parties remains the main occupant of the property.
Should there be evidence of fraud?
Once the title is transferred or the property is sold.
Talk to a CPA and look to your IRA for assistance
If you are a little skittish about the perimeters of a state grant, or you don’t feel like the extra commitment, there is another option. First-time buyers may withdraw up to $10,000 without the 10% penalty during their lifetime. This is not limited to only one person, so a couple could each withdraw their part.
This may happen only once in your lifetime and can be done against your traditional or ROTH IRA. The funds must be used within 120 days of withdrawal towards the purchase of your first home. Income tax is payable on the amount if withdrawn from your traditional IRA, so be sure to remember this in your long term calculations.
The upside of this option is that you don’t incur strict repayment conditions.
Finding lower interest rates
As a first time homeowner, looking into all your options for securing a mortgage is a no-brainer. Lower interest rates are an even more obvious factor.
With so many mortgage providers competing for borrowers, FHA loans have become not only an option for those with a weaker credit score. If you have a credit score of at least 680, you can secure a loan with the equivalent interest rate of a 740 credit score applicant! Lower rates equal a significant saving in the long run.
For those with a lower score - down to 580 - don’t despair. FHA loans are typically lower in interest due to government backing. As an added bonus, only a 3.5% down payment is required.
If you are buying your first home with a view to making it your permanent residence, there is more good news. Declaring homestead means your home will be taxed at $50 000 less on its assessed value. This means a reduced payment when you file your taxes for the year. Another portion of this benefit is that the amount your taxes can be increased each year is capped at 3%. Simply put - should property values significantly increase for some reason, your taxes are not paid strictly according to the new evaluated worth. It can only be increased by the capped percentage in a year. Here is a top tip - you can only declare homestead for occupancy from the 1st of January each year. Try and close deals by then so you can receive the fullest benefit.
One more tax benefit
Here is another good reason to take seriously your decision to buy your first home: The interest you pay on a mortgage of $750 000 or less is tax-deductible. Simply detail the amount you paid in interest over the year on your tax return form, and submit the records that documented your payments. You end up with a better bottom line than if you were to rent; an excellent reason to become serious about buying. Now isn’t that less daunting? Find an agent who can help you find some of these key benefits, and start browsing for your dream home! Benefit from over 20 years of intricate real estate knowledge combined with banking and finance expertise when you partner with Oak Avenue Real Estate. Schedule your complimentary investment consultation today.
Oak Avenue does not offer financial, legal, or tax advice. However, the firm works with a resourceful network that can help facilitate many steps when purchasing your first home.