The start of the new home buying season has arrived, but experts say if prospective home buyers don’t prepare properly, they could be in for an agonizing search.
Across the country, many housing markets are seeing a record low number of homes up for sale thanks to fewer existing homeowners opting to move and home builders constructing fewer new homes, according to MarketWatch.
Tight housing inventory is, in turn, fueling rapid appreciation in home prices, all while mortgage rates have generally increased at a steady clip.
Not only is that making it less affordable to buy a home for many Americans, it’s also making home purchase process more stressful. This year, perhaps more than ever before, prospective home buyers need to prepare, MarketWatch reported.
However, things are a bit different in the nation’s capital where first-time homebuyers in the District have a plethora of services that should make owning a new home easier than in most cities.
District housing officials said the programs, which include those that could cover expensive down payments and closing costs, have been designed with the idea of not only keeping families in the city, but attracting others to the ever-growing nation’s capital.
“DC is doing so much to encourage homeownership, especially East of the River,” said Polly Donaldson, the director of the DC Department of Housing and Community Development (DHCD).
“We want to make sure that there are more opportunities for residents to get ready to purchase their homes,” said Donaldson, whose served as director since 2015 and manages an operating budget of more than $250 million to preserve and produce rental and homeownership opportunities for District residents.
Among the programs residents have an opportunity to participate in is the Home Purchase Assistance Program (HPAP), which provides interest-free loans and closing cost assistance for those seeking single family homes, condominiums or co-op units.
As of last year, eligible applicants can receive as much as $80,000 in gap financing assistance and an additional $4,000 in closing cost assistance.
The program has a zero percent interest loan for those with incomes below 80 percent of the area median income, which is deferred until the property is sold, refinanced to take out equity, or is no longer the homeowners’ primary residence.
Under the program, moderate-income borrowers who earn between 80 percent and 110 percent of the area median income will have payments deferred for five years with a 40-year principal-only repayment period.
The maximum first trust loan amount cannot exceed $417,000, the conventional conforming loan limit.
In June 2013, DC’s Housing Finance Agency (DCHFA) restructured its previous DC Bonds program for new first-time homebuyer assistance program named “DC Open Doors.”
The program has now issued down payments for over $200 million in city homes.
It’s also more accessible to those working in the District who wish to live downtown and strives to eliminate the biggest obstacle to purchasing a home in DC – the down payment.
“One of the biggest barriers to buying a home is coming up with the down payment and saving for those closing costs,” said DCHFA Executive Director and CEO Todd A. Lee, who joined the agency in 2016 after more than 20 years in the field of multifamily and commercial real estate finance.
“In the ‘DC Open Doors’ program, you don’t need to be a first-time homebuyer and you don’t have to be a current resident of the District,” Lee said.
When asked whether potential homebuyers faced any new federal or local regulations in 2018, Lee said there were none.
“Our team tries to do good job of promoting all of our homebuying financial products, so I’m not sure if there’s any particular product or program I would say folks may not know about, but I will go through all of them because I will not miss an opportunity to re-promote each and every program that we do.” he said.
Another offering available to residents is the Mortgage Credit Certificate program, an incentive for home purchasing in the District that provides qualified buyers with the ability to claim a large tax credit.
“A tax credit is more beneficial because it puts money in your pocket,” Lee said.
“You can count it toward your income when qualifying for your mortgage and it could allow a potential homebuyer to purchase a little bit more.”
The program provides qualified borrowers the ability to claim a federal tax credit of 20 percent of the mortgage interest paid during each calendar year.
“I think the tide is turning on homebuyer assistance … we are in growth mode and we have to make sure that we’re putting our resources there for longtime residents and knowing that folks also are coming here,” Donaldson said.
“I think maybe people aren’t as aware of the resources and some might not think they’re eligible when they are. It’s about being proactive, and the mayor has been clear about it, so you must be very intentional. We say we want to see more homeownership, so there’s more down payment assistance,” Donaldson said.
Both Lee and Donaldson each emphasized at least one other District program homebuyers should consider: DC’s Roots to Roofs program.
In announcing that program two years ago, Mayor Muriel Bowser said “Roots to Roofs” highlight would celebrate residents who proudly have put their roots down in the District for generations – or those want to in the future.
The mayor said as the economy grows, city officials wanted to ensure that every resident —regardless of color, background, or zip code—can live in the District.
The Roots to Roof website — www.rootstoroofsdc.com — lists a host of housing programs in the District including a link to search for housing by type and price; loans and closing costs assistance; loans and down payment assistance; programs for District government employees; current homeowner financing assistance; rental housing solutions; and housing repairs and updates.
“My recommendations would be that potential homebuyers visit community-based organizations which are on our website,” Lee said. “Reach out to them to begin the process of educating yourself.”