The biggest hurdle to homeownership for some is the down payment and closing costs. These two expenses often deter low and moderate income individuals/families from even thinking about living the American Dream. Many people pass up the opportunity to own their own home because they’re unaware of the thousands of dollars in grant money available to assist with these expenses. The money is out there, but you need to know where to look.
This week Michael J. Abel, director for New York’s Housing Preservation and Development department (HPD); Florence Bartholomew from HSBC Bank; and Gita Hecht from the IRS talked about available grants and tax credits for first time homebuyers at the Bedford Central Community Development Corp. homebuyers seminar.
Abel’s program provides first time homebuyers with up to 6% of the purchase price of the home toward the down payment or closing costs on a new home. Most states have a housing and community development department. Check your state’s official website for your local housing office; also search for available homebuyer grants. Another helpful free money resource is Grants.gov and the U.S. Department of Housing and Urban Development (HUD). For resources specific to your state click on “state info” found on HUD’s homepage. HUD also offers the American Dream Down Payment Initiative, which provides up to $10,000 or 6% of the purchase price of the home, whichever is greater.
If you’re a New York resident, HPD should be on your list of programs to tap into. It provides first-time home buyers with a forgivable loan that turns into a grant after 10 years. Don’t be turned off by the loan part. Keep reading. The money only has to be paid back if you don’t stay in the home for 10 years. If you stay, it’s free cash! The program requires you to complete a homebuyer’s education course, and you must have your own savings to contribute to the down payment. Participants must also meet household size and income requirements.
Some banks provide home buying assistance through matched savings programs. The First Home Club at HSBC allows qualified first-time home buyers to earn $4 in grant monies for every $1 saved over a 10- to 24-month period. Bartholomew said potential homeowners can obtain a maximum grant of $7,500 by opening an account at HSBC Bank and making regular monthly deposits. At the conclusion of the program the funds can go towards the down payment or closing costs. This program is available to residents in New York and New Jersey.
If you’re not in these areas, an IDA (Individual Development Account) might be an option for you. I called Rochelle Watson, senior program manager for CFED (Corporation for Enterprise Development) to find out about the benefits of IDAs.
“They’re a good way for low and moderate income families to save towards the purchase of a home, post-secondary education, or to start or expand a small business,” said Watson.