If you are thinking of becoming a first-time homebuyer in Washington, there are a few things you need to consider first. If you qualify as a ‘first-time homebuyer,’ there are unique government programs that help you secure insured loans with favorable interest rates and, potentially, a $15,000 new homebuyer tax break, pending legislation. To take full advantage of being a first-time homebuyer, you need to understand the system!
This article will explore the first-time homebuyer program and help you take the necessary steps to get the most out of your home buying experience!
Who Qualifies as a First-Time Homebuyer?
According to the U.S. Department of Housing and Urban Development (HUD), a first-time homebuyer must meet one or more of the following qualifications to be eligible for federal loans and tax breaks.
A first-time homebuyer must:
- Not have owned a principal residence for three years or more, or
- Be married to a person who hasn’t owned a principal residence for three years or more
Additional conditions that make you eligible:
- If you are no longer married and co-owned your previous home with your spouse
- If you are displaced through disaster or damaged and only previously co-owned with a spouse
- If your principal residence was not fixed permanently to a foundation—trailers, mobile homes, tiny homes, etc.
- If your principal residence was non-compliant with state or local building codes and can’t be made compliant for less than the cost of building a new structure.
What Do First-Time Homebuyers Get?
Let’s break down what benefits first-time home buyers receive.
Access to FHA Loans
If you qualify, you have access to FHA-backed loans insured by the federal government. This means lenders can offer you a better deal because the federal government covers any risk associated with defaulting on the loan.
FHA Loans guarantee:
- Low closing costs on the purchase price
- Low down payments—as low as 3.5% compared to about 20% for conventional home loans
- Easier credit qualifications
Pending Legislation: the $15,000 First-time Home Buyer Tax Break
In response to the financial crisis, the Obama administration introduced a tax break for first-time homebuyers in 2008 as part of the Housing and Economic Recovery Act (HERA). This tax credit expired in 2010 and wasn’t renewed.
However, in 2021, legislation was introduced to renew the program and increase the tax credit to 10% of your home’s purchase price, not exceeding $15,000. This bill hasn’t passed yet, but it has strong support in congress. At the very least, the push for more affordable housing isn’t going away.
Does Washington State Have Any First-Time Home Buyer Benefits?
Yes, the Washington State Housing Finance Commission (WSHFC) offers two mortgage assistance programs for first-time homebuyers—the WSHFC Home Advantage program and the WSHFC House Key Opportunity.
These programs can also be applied to FHA loans and other federal programs. Each program has its own qualifications, and they are geared toward lower-income residents of Washingon state.
WSHFC Home Advantage
This program is designed to help first-time homebuyers in Washington state obtain a lower interest rate. With the WSHFC Home Advantage program, there are no restrictions on the type of property a first-time buyer can purchase. Also, qualifying is relatively straightforward:
- Annual income must be under $145,000
- 50% or less debt to income ratio
- 620 minimum credit score
- Must complete a first-time homebuyer seminar
Also, this program offers down payment assistance that acts like a second mortgage. This loan provides applicants with 4% of their total mortgage amount and is designed to help first-time homebuyers cover their down payments. There is no interest on the loan with this program, and payments are deferred for 30 years.
WSHFC House Key Opportunity
This program is also designed to help first-time homebuyers in Washington lock in below-market interest rates. First-time homebuyers must meet income and acquisition cost limits, which vary from county to county and change based on the size of your household. Check out WSHFC’s resource page that breaks down Washington income and household restrictions by county.
Also, if the property you are purchasing is located in a ‘targeted area,’ you do not have to be a first-time homebuyer to qualify for the WSHFC House Key Opportunity. Like the WSHFC Home Advantage program, you must complete a first-time homebuyer seminar to qualify.
Are You Ready for Home Ownership in Washington?
If you want to be a first-time home buyer in Washington, you now have the necessary knowledge to begin the home buying process! You should take full advantage of federal and state assistance programs to help you get started on your first-time home buying journey! Be sure to talk with a financial advisor and make sure your credit is in good shape before beginning the process.
About the Author
Jenn Walker is a freelance writer, blogger, dog-enthusiast, and avid beachgoer. She writes for several home service, real estate, and junk removal companies.