If you are planning to buy your first home, you should be aware of these advantages! They can help save a lot of money and efforts, check now!
1. Homestead Exemption/ Property Tax Deduction
For first-time homebuyers, they can enjoy property tax preference with a limitation of $10,000. Thanks to home exemption, the value of the house is reduced and buyers do not have to pay the full amount.
2. Mortgage interest deduction
First-time home buyers can reduce their taxable income and lower their taxes payable consequently. According to Tax Cuts and Jobs Act (TCJA), if the interest paid is less than $750,000, individual buyers can make tax deduction. As for married couple, if they are filing separately, the interest paid should be less than $375,000 and if they are filing jointly, the interest paid should range from $12,700 to $24,400.
3. IRA free penalty withdrawal
First-time home buyers can take out at most $10,000 from their traditional IRA or Roth IRA account without the early withdrawal penalty. If a married couple have different IRA accounts, they can take out no more than $20,000 for their first home. Once they have withdrawn the money, they should use them within 120 days, or else they have to pay the 10% early withdrawal penalty. Note that home buyers still need to pay income tax for the money they withdraw from their traditional IRA account.
4. State program
Some states in the United States such as Illinois, Ohio, and Washington have state program which offers assistance to first-time home buyers with their down payment and closing fees. Buyers who are qualified for state program should have stable income and the price of their house cannot exceed certain amount.
5. other program
Besides state program, the Federal National Mortgage Association’s HomePath ReadyBuyer program together with the programs sponsored by other companies offer help to first-time home buyers. These programs help those with poor credit history to apply for loan and offer assistance with their closing fees.
6. applying for a Section 184 loan
Section 184 loan allows native American first-time home buyers to purchase their house with 1.5% guarantee fee at first and a 2.25% down payment for a loan of $50,000. Meanwhile, the interest rate here is based on prevailing market rate instead of borrowers’ credit scores. Note that only single-family home can apply Section 184 loan.