With ads everywhere touting the $8,000 federal tax credit for first-time homebuyers, it may be easy to overlook other programs that can help home shoppers save big.
The best deals often go to buyers who take a combo-platter approach to home finance. Your state, city, employer and neighborhood improvement association may all have deals that you can tap with the $8,000 federal tax credit. Alumni associations and rural development agencies might also help reduce your housing costs.
Don't forget the big three. The seller, builder and lender can kick in some serious sweeteners, according to mortgage brokers and real estate agents. And don't lollygag: Mortgage incentive programs can change frequently and without notice. It pays to research what's available right now.
"Research what programs are available in a given locale," says John Karsten, broker and owner of Karsten Real Estate in Waupun, Wis. "You have to go item by item by item. Each lender is offering programs that are a little bit different."
Often, you won't find out about these public and private programs without putting in some time doing online and phone research that is tailored to your personal situation, including your exact location, income level and profession. Those who read each program's fine print are the ones who win.
While the federal tax credit arrives only after you own the home, builders, sellers, lenders and some localities will give you cash when you need it most -- to seal the deal at the closing table.
More help for homebuyers
- State governments.
- Cities and neighborhood funds.
- Small towns and rural areas.
- Sellers and builders.
- Employer programs.
- College alumni associations.
Start with the stateSome states offer excellent housing assistance. You may be able to double dip and get state help now and a federal credit later.
On June 8, 2009, despite its budget troubles, California reinstituted a down payment assistance loan program and special loans for homes owned by the California Housing Authority. The state's Web site emphasizes that some buyers can get state help and the federal tax credit.
California offers low- and moderate-income deals, though "moderate" can be far from paltry. For example, in Marin County, Calif., a single borrower earning up to $81,300 is eligible for down payment help.
The down payment assistance is offered through a deferred payment junior loan of up to 3 percent of the purchase price or appraised value -- whichever is less -- for all homes, and up to 5 percent for homes in certain areas.
That down payment loan does not have to be repaid until the first mortgage is paid off, or the home is refinanced or sold. Currently, the interest rate for California's down payment loan is 3.25 percent.
To find out what your state has, try the U.S. Housing and Urban Development site, which has a scroll-down, state-specific menu.
Note that the rule of "buyer beware" applies. No matter what your state offers, compare its mortgage deal with the low down payment programs offered through the Federal Housing Administration and those offered by the Department of Veterans Affairs, if you served in the armed forces.
City perks and neighborhood fundsEven in this market, some cities and towns still have funds earmarked to help develop particular neighborhoods.
In Chicago, buyers in some areas can get up to 4 percent of the home price back in their choice of down payment assistance, closing costs or rate buy-down. That's cash you don't want to miss out on just because you weren't aware of it or because you used the wrong bank.
In addition, the city's TaxSmart program provides a tax credit equivalent to 20 percent of the interest paid on a mortgage for first-time buyers and those buyers who purchase in targeted areas. Specific participating lenders are listed on the city's Web site, but other banks may match that deal to get your business. And it's not just in Chicago.
"I've seen a few isolated cases of people getting grant money to help with their down payment from (other) local programs," says Carolyn Warren, author of "Mortgage Rip-Offs and Money Savers," and a banker-broker for Shelter Mortgage who lives in Bellevue, Wash. "One was in San Diego and the other was in Michigan."
Sometimes, nonprofits team up with a particular bank to offer special deals for qualified buyers. In Washington, D.C., Manna Mortgage Corp. -- affiliated with Neighborhood Housing Services of America, a national nonprofit that aims to revitalize neighborhoods -- partners with Citibank, which kicks in up to $3,000 in closing costs. Meanwhile, Neighborhood Housing Services of Chicago offers fixed-rate loans with down payments as low as 1 percent plus "gap" loans that let borrowers avoid paying private mortgage insurance.
And don't forget city tax deals. Washington, D.C., has a first-time homebuyer tax credit of up to $5,000. There is also a five-year, property-tax abatement program, and the city even has recording and transfer tax credits that can go toward closing costs, totaling up to 2.2 percent of the purchase price.