The state of Florida, through the Internal Revenue Service, offers a little known program giving first-time home buyers an income tax credit up to $2,000 per year for every year they live in their new home.
The Florida Housing Finance Corporation runs the program through participating lenders, saving first-time home buyers up to 50% of the interest paid on their new first mortgages, capped at $2,000 per year, for every year the new home owners live in their home.
This is a tax credit, not a tax deduction, so the savings directly reduces the new homeowner’s yearly income tax burden by up to $2,000.
Amount Financed $200,000
Interest Rate 4%
First Year Interest Paid $8,000
50% of Interest Paid $4,000
Actual Tax Savings $2,000 (Program Limit)
The program is only offered through participating lenders to first-time home buyers, defined as a buyer or their spouse, who have not owned their primary residence in the previous three-year period. The tax credit is available to buyers who own investment properties as long as they didn’t live in those properties during the previous three-year period.
The three year waiting period is waived for US Military Veterans and in targeted areas throughout the state.
Each County has specific income limits based on family size and limits on the purchase price of the new properties.
The program has another advantage beyond the yearly savings. Buyers can use the savings toward qualifying for their new mortgage.
The Federal Housing Administration (FHA) lets lenders use the tax credit to reduce the buyer’s qualifying monthly mortgage payments by up to $166.67 per month, allowing buyers to qualify for a loan approximately $25,000 more than they would without the tax credit.
Fannie Mae and Freddie Mac allows buyers to use the savings as addition income used for qualification, increasing their purchasing power by approximately $15,000.
This is a little known program which many lenders don’t participate. Hamilton Group Funding is the leading participant in South Florida and throughout the state.
First-time homebuyers should be aware of the programs available to entice home ownership, while saving themselves thousands of dollars throughout the life of their loan.
The program has been around for many years, but with new establishments come new rules, so first-time homebuyers should take advantage of these programs now.