Homeownership can be rewarding, and you have learned some of its benefits. The previous section also discussed the importance of budgeting for homeownership. There are costs associated with buying a home. The homebuyer must plan for expenses such as, but not limited to, home inspection, appraisal, and homeowner's insurance. The two costs that require the most money from a homebuyer are down-payment and closing costs.
Downpayment is a percentage of the home's purchase price and is paid in cash (via certified check) at settlement (the final stage when the homebuyer receives keys to the home). The lender’s risk and loan amount are reduced by the cash the homebuyer provides as a downpayment. The type of loan determines the required downpayment amount, which can range from 3.5% up to 20%.
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The Benefits of an FHA Mortgage |
Here’s a video to watch for more informationClosing costs include lenders and third-party fees, such as homeowner's insurance, settlement attorney's fee, etc., which you also pay at settlement. Typically, closing costs can be estimated between 3% - 5% of the home's purchase price.
The cash requirements for downpayment and closing costs would prevent many people, especially low-income households, from buying a home. To provide low-income households with opportunities to become homeowners, the federal and D.C. governments have programs to help, and a few of the programs are listed below:
Federal Government
- FHA Mortgage – Loans with a low downpayment requirement of 3.5% and FICO* credit score requirement as low as 580.
- Veteran Administration (VA) Home Loans - Veterans and active-duty military personnel are eligible for VA loans, which do not require a downpayment or minimum credit score.
Here is a link for more information on federal government-backed home loans: Home buying assistance | USAGov
*FICO Score – FICO is the acronym for the Fair Isaac Corporation. FICO developed the method to calculate credit scores, and the FICO score is their trademarked brand. Most lenders use FICO scores to determine a borrower’s creditworthiness.
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The District of Columbia (D.C.) Government
Home Purchase Assistance Program (HPAP) - Since 1978, HPAP has helped low-to-moderate income households buy homes in D.C. HPAP provides interest-free loans to eligible, first-time homebuyers for down-payment and closing costs assistance. HPAP loans, in some cases, are deferred for the life of the loan. The loan amount has varied over the years. In 2023, HPAP down-payment assistance was up to $202,000 and up to $4,000 in closing costs assistance. HPAP loans are based on the availability of funds. See the link below for more information:
Employer-Assisted Housing Program (EAHP) – This program loans downpayment and closing costs assistance to eligible District government employees who are first-time homebuyers to buy in D.C. The loans are interest-free, up to $20,000, and a matching-funds grant of up to $5,000. First responders can receive $10,000 as a recoverable grant that may require meeting certain conditions for five years and a matching-funds grant of up to $15,000. EAHP loans are based on available funds. For more information on the program and eligibility requirements, see the link below:
Employer-Assisted Housing Program (EAHP)
Negotiated Employee Affordable Home Purchase Program (NEAHP) – The program offers down-payment and closing costs assistance for eligible District government employees whose position is covered by collective bargaining. The amount of assistance is determined by the number of years of service in the eligible collective bargaining unit. Assistance is from $3,000 to $26,500, in the form of a grant, to buy in D.C. The grant is forgiven after ten years if the employee meets the terms of the grant agreement. NEAHP loans are based on the availability of funds. For more information on the program and eligibility requirements, see the link below:
Negotiated Employee Affordable Home Purchase Program (NEAHP) | dhcd (dc.gov)
DC Open Doors - The program offers deferred, repayable loans for downpayment assistance and below-market interest rates for first-trust mortgages for purchasing a home in D.C. Qualified, first-time and repeat homebuyers can participate. For more information on the program and eligibility requirements, see the link below:
DC 4ME – This program provides first trust mortgages at a reduced interest rate for qualified D.C. government employees. There is also an option for down payment assistance. For more information on the program and eligibility requirements, see the link below:
Inclusionary Zoning (IZ) – IZ is a law that requires affordable housing units in most new (and some renovated) developments. The IZ Program is a housing lottery for IZ rentals or homes for sale. For more information on the program and eligibility requirements, see the link below:
Inclusionary Zoning (IZ) Affordable Housing Program | dhcd (dc.gov)
D.C. Department of Housing and Community Development (DHCD), Property Acquisition and Disposition Division (PADD) – Periodically, PADD rehabilitates homes to provide affordable housing opportunities. See the link for additional information on PADD and to check if properties are available for sale.
Homeownership Opportunities | dhcd (dc.gov)
To learn about additional homeownership assistance programs, see the link below:
Front Door for Your Home | Government of the District of Columbia (dc.gov)
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D.C. Office of Tax and Revenue (OTR) Programs for Homeowners
Lower Income Home Ownership Tax Abatement
Eligible homeowners may receive up to five-year tax abatement and be exempt from paying recordation and transfer taxes. See the links below for more information on the program and eligibility requirements.
Property Owner Tax Relief Program for Senior Citizens and Persons with Disabilities – Eligible homeowners who are 65 years of age or older, or persons with disabilities, may have their property taxes reduced by 50 percent. See the links below for more information on the program and eligibility requirements.
Veterans with Disabilities - Homeowners with permanent disabilities resulting from a service injury can receive a $445,000 homestead deduction (deducted from the assessed property value). See the links below for more information on the program and eligibility requirements.
Here are links to OTR’s property tax credits and deductions programs, outlined above:
Homestead/Senior Citizen Deduction | otr (dc.gov)
Other Credits and Deductions | otr (dc.gov)
The District’s Disabled Veterans Homestead Deduction Helps Veterans by Reducing the Tax Assessment of Their Home by $445,000 | MyTax.dc.gov (wordpress.com)