Washington, D.C. First-Time Home Buying Assistance Programs & Grants for 2023

Washington, D.C. First-Time Home Buying Guide

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    By Walecia Konrad

    (Last Updated – 10/2022)

    Home to the White House, perhaps the most famous U.S. residence, Washington, D.C., is not a city or a state. Nonetheless, it is the 20th most populous area in the country, with more residents than all of Wyoming or Vermont.

    The district’s 120-plus unique neighborhoods are arranged in quadrants surrounding the U.S. Capitol, another famous piece of real estate.

    Like many areas of the country, the district has seen slowing sales amid rising mortgage rates. Prices, however, have held relatively steady — and high. The median sales price in August 2022 was $650,000, according to Redfin.

    Who Is Considered a First-Time Homebuyer in Washington, D.C.?

    For many of the Washington homebuyer assistance programs, you do not have to be a first-time homebuyer. You qualify as long as you do not currently own a home. That said, some of the programs do require that you have not owned a primary home in the past three years, which is the generally recognized definition of a first-time buyer.

    Whether or not you’ve owned a home, it’s always a good idea to attend a homebuyer education program. And for some of the programs noted below, attendance is required. Homebuyer education can help all buyers understand how much mortgage they can afford, what fees are involved, and how the lending and closing processes work.

    💡 Recommended: First Time Home Buyer Guide 2022

    5 Washington, D.C. Programs for First-Time Homebuyers

    The District of Columbia Housing Finance Agency (DCHFA) offers homebuyer and down payment programs to those who meet income and credit requirements and loan maximums.

    Let’s take a closer look.

    1. Open Doors Mortgage Program

    Qualified first-time and repeat buyers can receive 30-year mortgages at below-market rates for the purchase of a home anywhere in Washington, D.C. You do not have to be a current district resident to apply.

    To qualify, borrowers must have a credit score of 640 and an annual income of $154,800 or below. (This is not a household income number; it only applies to the buyer.) The mortgage amount cannot total more than $647,200, but there are no purchase price restrictions. Maximum debt-to-income ratios apply.

    2. Open Doors Down Payment Assistance Loan

    This is a no-interest, no-payment deferred loan used to pay the full amount of your required minimum down payment on an Open Doors primary mortgage. The loan comes due only when the house is sold or transferred, is no longer your principal residence, the mortgage is refinanced, or the 30-year mortgage term is up.

    Requirements are the same as Open Doors primary mortgages, including a credit score of 640, annual income at or below $154,800, and a mortgage of no more than $647,200.

    3. DC4ME Program for Government Employees

    The DC4Me program offers full-time D.C. government employees access to a first mortgage at a reduced interest rate and the option of down payment assistance worth 3% of the mortgage in the form of a 0% interest deferred loan.

    To qualify, the borrower must be employed by the district, including independent agencies, public charter schools, and any organization that falls under the oversight of the Council of the District of Columbia. Unlike other DCHFA programs, eligible government employees must be a first-time buyer — meaning they do not currently own a home and have not owned a home in the past three years. Borrowers must also complete a home buying education course.

    Like the other programs, a credit score of 640 is required. But unlike the other programs, there is a maximum household income (not just the borrower) of $154,800. The mortgage loan amount cannot exceed $548,250, and there is a purchase price limit of $565,300. A borrower’s debt-to-income ratio may not exceed 50%.

    4. Home Purchase Assistance Program

    Interest-free loans are prioritized for low-income, elderly, handicapped, disabled, or displaced borrowers. First-time homebuyers (those who have not owned a home in the past three years) may access up to $80,000 in down payment costs and $4,000 in closing costs as a second, zero-interest loan.

    How much you receive and the terms of your repayment depend on your income and household size . For moderate-income households, payments are deferred for the first five years, then are amortized over 40 years. Low-income households will have no monthly payments. All loans are payable in full if you transfer or sell the property, refinance the primary mortgage, or rent out the house.

    5. Washington, D.C., Mortgage Credit Program

    Qualified buyers can claim a federal tax credit of up to 20% of mortgage interest each year. Only borrowers who have not owned a home in the past three years qualify. Household income and sales price maximums apply, and vary depending on household size and location of property.

    Recommended: Understanding the Different Types of Mortgage Loans

    How to Apply to Washington, D.C. Programs for First-Time Homebuyers

    You can find information about qualifications, applications, and requirements for loan programs at the DCHFA website .

    You’ll also find a list of approved participating lenders who administer the loans and can help you apply.

    It’s especially important for first-time buyers, who may be unfamiliar with the mortgage lending process, to compare interest rates, fees, and other costs among lenders.

    To help with that process, D.C. Open Doors hosts two homebuyer education sessions each month for free as well as free seminars outside of Open Doors. Here’s the latest calendar that can help you find education resources.

    Federal Programs for First-Time Homebuyers

    Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, like state programs, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.

    The mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.

    Federal Housing Administration (FHA) Loans

    The FHA, which is part of the U.S. Department of Housing and Urban Development (HUD), insures mortgages for borrowers with lower credit scores. Homebuyers choose from a list of approved lenders that participate in the program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers with FICO® credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.

    Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.

    FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years. You can learn more about FHA loans in general and FHA lending limits by area.

    Freddie Mac Home Possible Mortgages

    Very low- and low-income borrowers may make a 3% down payment on a Home Possible® mortgage. These loans allow various sources for down payments, including co-borrowers, family gifts, employer assistance, secondary financing, and sweat equity.

    The Home Possible mortgage is for buyers who have a credit score of at least 660.

    Once you pay 20% of your loan, the Home Possible mortgage insurance will be canceled, which will lower your mortgage payments.

    Fannie Mae HomeReady Mortgages

    Fannie Mae HomeReady® Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; pricing may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.

    For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site .

    Fannie Mae Standard 97 LTV Loan

    The conventional 97 LTV loan is for first-time homebuyers of any income level who have a credit score of at least 620 and meet debt-to-income criteria. The 97% loan-to-value mortgage requires 3% down. Borrowers can get down payment and closing cost assistance from third-party sources.

    Department of Veterans Affairs (VA) Loans

    Active-duty members of the military, veterans, and eligible family members may apply for loans backed by the Department of Veterans Affairs. VA loans , to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment. Most borrowers pay a one-time funding fee that can be rolled into the mortgage.

    Native American Veteran Direct Loans (NADLs)

    Eligible Native American veterans and their spouses may use these no-down-payment loans to buy, improve, or build a home on federal trust land. Unlike VA loans listed above, the Department of Veterans Affairs is the mortgage lender on NADLs. The VA requires no mortgage insurance, but it does charge a funding fee.

    U.S. Department of Agriculture (USDA) Loans

    No down payment is required on these loans to moderate-income borrowers that are guaranteed by the USDA in specified rural areas. Borrowers pay an upfront guarantee fee and an annual fee that serves as mortgage insurance.

    The USDA also directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA site .

    HUD Good Neighbor Next Door Program

    This program helps police officers, firefighters, emergency medical technicians, and teachers qualify for mortgages in the areas they serve. Borrowers can receive 50% off a home in what HUD calls a “revitalization area.” They must live in the home for at least three years.

    Washington, D.C. First-Time Homebuyer Stats for 2022

    Here is a snapshot of recent Washington home buying statistics:

    •  Median home sale price: $650,000

    •  3% down payment: $19,500

    •  20% down payment: $130,000

    •  Average credit score: 717

    Financing Tips for First-Time Homebuyers

    In addition to federal and state government-sponsored lending programs, there are other financial strategies that may help you become a homeowner. Some examples:

    •  Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.

    •  Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.

    •  401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.

    •  State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.

    •  The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.

    •  Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.

    •  Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.

    The Takeaway

    Washington, D.C., the district that’s neither a city nor a state, has a variety of first-time homebuyer programs for those who meet income and other criteria. Other first-time buyers can look into government-insured and conventional loans on their own to find a good fit.

    Make your dream of being a homeowner come true with SoFi’s competitive mortgage rates and down payments as low as 3% for qualifying first-time homebuyers.

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    Should I take first-time homebuyer classes?

    Yes! Good information is key to a successful home-buying experience for anyone, but especially for newcomers, who can easily be overwhelmed by the jargon, technicalities, and magnitude of applying for a mortgage and purchasing a home. First-time homebuyer classes can help. Indeed they are required for many government-sponsored loan programs.

    Do first-time homebuyers with bad credit qualify for homeownership assistance?

    Often they do. Many government and nonprofit homeowner assistance programs are available to people with low credit scores. And often, interest rates and other loan pricing are competitive with those of loans available to borrowers with higher credit scores. That said, almost any lending program has credit qualifications.

    Is there a first-time homebuyer tax credit in Washington, D.C.?

    Yes, the Washington, D.C., mortgage credit certificate program allows qualified homebuyers to claim a federal tax credit of up to 20% of mortgage interest each year. There are fees associated with this program.

    Is there a first-time veteran homebuyer assistance program in Washington, D.C.?

    The D.C. Housing Finance Agency does not offer specific veteran first-time homebuyer programs, but veterans may find support from the agency’s other housing assistance programs. In addition, district vets may find loans from the federal VA programs listed above.

    What credit score do I need for first-time homebuyer assistance in Washington, D.C.?

    Applicants for the District of Columbia Housing Finance Agency programs listed above must have a credit score of 640 or above. There are private and federal loan programs that borrowers with lower scores may be able to access.

    What is the average age of first-time homebuyers in Washington, D.C.?

    There seems to be little data on first-time buyers in Washington, D.C., but the median age nationally is 33.

    Photo credit: iStock/Pgiam

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