March 6, 2019

Assistance for DC First-Time Homebuyers

Assistance for DC First-Time Homebuyers

In 2018, first-time homebuyers made up 33% of total homebuyers in the United States. If you are considering purchasing your first DC home, now may be a great time to do it. While the DC median home value of $581,100 sounds daunting, home values in the District have remained relatively stable for the past couple of years.

In addition to a favorable housing market, the DC Department of Housing and Community Development offers different programs that make the investment for first-time District home buyers a bit lighter. Read about each program and see if you qualify for any assistance.

Reduced Recordation Tax

Every time a house is sold, the state and/or local government applies a recordation tax to retitle the property. For homes sold at $399,999 or less, the recordation tax is normally 1.1% of the sales price while a 1.45% recordation tax is applied to homes sold for $400,000 or more.

However, first-time DC homebuyers can apply for a reduced recordation tax rate of 0.725%. The qualifications for this program include:

  • Purchasing a home in DC for the first time (residents who co-owned a DC home with an ex-spouse are exempt).
  • Using this new home as the primary residence.
  • Qualifying for the Homestead Deduction.
  • A home sales price not exceeding $632,500.
  • Income not exceeding the threshold; income levels are found on this table.

You can view the complete application here. If you think you qualify, Smart Settlements will prepare the application for your signature at closing.

The Home Purchase Assistance Program (HPAP)

The DC Home Purchase Assistance Program (HPAP) provides down payment and closing cost assistance to first-time DC homebuyers.

The gap-financing that HPAP provides includes a home loan up to $80,000 with payments deferred for five years. In addition, buyers can receive assistance with closing costs that equal 4.0% of the home’s sale price or $4,000, whichever amount is less.

Recipients of HPAP must:

  • Be the head of the household.
  • Be a first-time homebuyer.
  • Qualify as a low- or moderate-income household, according to this table.
  • Not have any ownership of any residential real estate within the previous three years.
  • Use the new property as the primary residence.
  • Have a good credit rating.

Applications for HPAP are prioritized based on a few factors. First, priority is given to low-income households, the elderly, disabled applicants, and displaced District residents. The district also prioritizes those who have been employed in DC for at least one year prior to applying.

Contact one of DC’s Community-Based Non-Profit Organizations (CBOs) to learn the specifics of your eligibility and to apply for HPAP.

DC Open Doors

DC Open Doors offers up to 3.5% of a down payments for qualified DC homebuyers. The 0% interest loan is forgivable as long as you do not sell or refinance the home, or remove that home as your primary residence, in the first five years.

To qualify for DC Open Doors, you must meet the following criteria:

  • Buying a home in DC
  • Minimum credit score of 640
  • Maximum household income of $140,640
  • Maximum debt-to-income ratio of 50%
  • Maximum 1st trust loan amount of $453,100 (no maximum on the sales price)

To apply for DC Open Doors, contact one of the approved lenders.

DC Mortgage Credit Certificate

Another resource that provides financial help to first-time DC homebuyers is the DC Mortgage Credit Certificate (MCC). The benefit of an MCC is that the homeowner can claim 20% of the mortgage interest paid that calendar year on his or hers taxes.

The first caveat for applying for an MCC is that your 1st Trust Loan is through a lender approved by the DC Housing Finance Agency (DCHFA). If that qualification is met, then applicants must also:

  • Be buying a DC home for the first time in three years (Targeted Areas and Veterans using their one-time exception are exempt).
  • Have a household income and home sales price below the maximums in this table.
  • Must be a single-family residence.

Apply for an MCC through a DCHFA-approved lender.

Smart Settlements Can Help

Still need help navigating the purchase of your first DC home? Contact Smart Settlements to talk to a specialist today.

Related: SMART FAQs About Property Tax in Washington, DC

For additional information on this topic contact Evelyn Miller, Partner, at 202-753-7400.

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