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A Guide to Financing For First Time Homebuyers in Washington DC

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Interested in purchasing a home in Washington DC? You are probably aware it is a pretty expensive place to live in. This makes finding housing in DC quite challenging, perhaps even like something out of your reach. That is why it makes sense to explore all financing options for first-time homebuyers in Washington DC before you venture into purchasing your first home. Luckily, the District of Columbia’s Housing Finance Agency (DCHFA) offers several financing programs. 

Knowing your way around these national loan programs can give you the necessary kick when it comes to finding your place under the Washington DC sun. Most of the following mortgage schemes have low down payment rates and flexible credit score requirements. So, without further ado, let’s have a look at the homebuying financing options at your disposal. 

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Do your research to choose the best financing option for your situation.

National Programs

Conventional Mortgage Packages

First-time homebuyers in Washington DC are eligible to apply for a state-funded mortgage package that allows them to pay as little as a 3% down payment. Yet, if you place a 20% down, you are excused from paying mortgage insurance. The majority of lenders in this program require a credit score of at least 620 to be eligible for the conventional mortgage package. Note that a credit score of about 730 gives you access to the best interest rates. 

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FHA Loans

This loan caters to first-time homebuyers, allowing low credit scores and reduced down payments. In fact, this is the most preferred financing program for first-time homebuyers who have lower credit scores. FHA (or the Federal Housing Administration) approves down payments as low as 3.5% for homebuyers with credit scores higher than 580. 

However, this is not the only benefit of opting for an FHA loan. Lenders may even approve a loan for credit scores as low as 500 if you set down a 10% down payment. Yet, take into account that mortgage insurance is then mandatory until you pay off the FHA loan. 

VA Loans

The US Department of Veterans Affairs issues this financing package. It allows military personnel, their spouses, and veterans who have low credit scores to finance their home purchases. If you belong to one of these demographic groups, you will enjoy benefits such as no necessary down payments, no minimum credit score, and no mortgage insurance liabilities. However, you might have to pay the VA funding fee. 

Therefore, this mortgage program should allow you to find the perfect Washington DC home. If you already have to plan your relocation to DC, make sure you explore the discount options aimed at military members. According to A2B Moving and Storage consultants, moving companies may offer special offers or free consultations to military officials, veterans, and spouses. 

USDA Loans

Rural and suburban homebuyers are eligible to take out this home loan. The US Department of Agriculture provides this mortgage loan, but there are certain income requirements. Namely, USDA home loans are given out to applicants with credit scores higher than 640. Yet, keep in mind this requirement may vary depending on the region. If you have a lower credit score than required, you may have to meet stricter underwriting standards. 

DCHFA

If you are looking to buy your home in DC for the first time, you can ask for assistance with regard to the down payment and closing costs, whether purchasing a condo or a cooperative. You also have access to federal tax credits. 

However, as a borrower, your income and debts have to be within the proscribed limits of the program. You also have to have the necessary credit score, which will, in turn, determine the loan amount you are eligible for. Read on to better understand what a DCHFA home-purchasing loan allows you to do.

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There are a variety of Washington DC-funded mortgage loan programs available to you as well.

DC Open Doors

This DCHFA loan is suitable for people who need down payment assistance and low mortgage rates. The DC Open Doors program offers mortgages at very low interest rates for DC homebuyers. In fact, borrowers who qualify for this loan can get financial backing to pay off the minimum down payment amount. 

In addition, loan repayment is not required until the mortgage is refinanced, the home sold, or the borrower’s primary residence changed. Even though it does not have to be your first time to purchase a home to apply, you cannot own another home at closing. This means that you would need to sell your current property to close the purchase of your new DC home.

Mortgage Credit Certificate (MCC)

If you have not owned a house in the last three years, you are eligible for MMC. It allows you to get a tax credit of up to 20% of the yearly loan interest. Additionally, the first-time homebuyer requirement can be overlooked if you are a veteran or if you purchase in some regions of Washington DC. This makes the entire process of buying and moving to Washington DC so much more accessible. You can hire reputable residential movers, and they will help you feel at home in no time, especially since you do not have financial responsibilities to the lender in the beginning.

Home Purchase Assistance Program (HPAP)

This state-funded financing program is perfect for low-income borrowers as it provides down payment and closing costs coverage. Alongside the mentioned assistance, the HPAP gives first-time homebuyers in DC up to $80,000. This funding is observed as a no-interest loan, so you are under no obligation to pay it off in the first five years. However, note that you should look into other financing options for first-time homebuyers in Washington DC if you plan to sell or refinance the property or otherwise change your primary residence.

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