To Buy or Not to Buy - That is the Question for Millennials
Many millennials want to buy a home, but they are afraid they can't afford to. In fact, millennial homeownership in the United States is at a record low. Between rising housing prices and record amounts of student debt, they are rightfully concerned about the affordability of not only committing to a mortgage, but coming up with a down payment to begin with. That being said, they are also tired of filling up the pockets of landlords instead of investing in their own futures.
If you are thinking about buying your first home, but you're not sure you can afford it, the Alabama Housing Finance Authority can help you. They have two programs designed to assist people in purchasing homes.
- Step Up - Step Up is a homeownership program designed specifically for moderate-income home buyers who can afford a mortgage, but need help with the down payment. With this program, the money for the down payment is secured by a 10-year second mortgage and is combined with a 30-year, fixed-rate first mortgage. Since the loans are serviced by ServiSolutions, a division of AHFA, homeowners have only one check to write each month. Program participants must complete a homebuyer education course to qualify a small price to pay to become a homeowner! People who earn less than $97,300 are eligible for the Step Up program, regardless of household size or location.
Step Up+ is a new, temporary program that was just announced by the AHFA in June, 2017. This mortgage enhancement will pay the upfront split private mortgage insurance premium (up to $1,500) for homebuyers who earn less than 80% of the area median income. This way, homebuyers will pay a lower monthly premium as part of their mortgage payment. Information and qualifications:
- HFA Preferred conventional loans only
- 3% down payment assistance available through Step Up
- For new or existing homes in Alabama
- Homebuyers must have a credit score of 620 or higher
- Must complete homeownership education course
- Must apply for loan through a participating lender
- Private mortgage insurance will be underwritten by Genworth or ARCH (no delegated options)
All Step Up+ loans must close by September 30, 2017.
The Step Up program's standard $97,300 household income limits will NOT apply for Step Up+.
For more information, contact a participating lender.
- Mortgage Credit Certificates - The Mortgage Credit Certificate (MCC) program gives homebuyers another savings option. MCCs are available with conventional fixed-rate, FHA, VA, Rural Development and privately insured mortgages. Applications are accepted on a first-come, first-served basis by a statewide network of participating lenders. Participants must meet federally income and sales price
MCCs provide a tax credit to reduce the amount of federal taxes owed by a percentage of the annual mortgage interest paid each year. The remaining annual interest may be claimed as a mortgage interest deduction on the homebuyer's federal tax return.
Qualified homebuyers pay lower federal income taxes or benefit from immediate savings by updating the withholdings on their W-4 form. MCCs may be paired with AHFA's Step Up program or any other 30-year, fixed rate, amortizing mortgage offered by a participating lender.
Mortgage credit rates are based on the loan amount:
- 20% MCC for loans of $150,001 or greater; no cap
- 30% MCC for loans of $100,001 to $150,000; $2,000 per year cap
- 50% MCC for loans of $100,000 or less; $2,000 per year cap
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