Some DC Homebuyer Programs Are Wildly Underused

There are a handful of first-time buyer programs in DC that don't get nearly enough attention. Some can reduce closing costs, some can help with a down payment, and some can do both. These programs can often get overlooked especially if you are using an out of state lender. If you're planning to buy in DC, they're worth knowing about before you start writing offers.

First and most common is the DC transfer tax reduction. Eligible first-time buyers can have the transfer tax rate reduced from 1.45% (or 1.1% depending on price) to 0.725%. On a $600,000 purchase, that's about $4,350 less needed at closing.

The DC Tax Abatement Program can be even more significant. Depending on the property and eligibility requirements, it can eliminate the buyer's transfer tax, provide a credit related to the seller's transfer tax, and reduce property taxes for up to five years. On a $400,000 purchase, that can amount to roughly $8,700 in savings at closing before factoring in the property tax benefit.

HPAP is probably the best-known DC assistance program, and for good reason. Eligible buyers can receive up to $206,000 in assistance through a deferred loan that can be used toward down payment and closing costs. There are income limits and other requirements, but the amount of assistance available is much larger than most people expect (of course funds run out often).

DC Open Doors is another program worth knowing about. It can help cover the minimum down payment requirement through a second loan with no monthly payments. Depending on the situation, it can significantly reduce the amount of cash needed to buy a home.

Most of these programs have been around for years, yet a surprising number of buyers have never heard of them (and shockingly real estate agents and lenders). If you're planning to buy in DC, it's worth spending a few minutes seeing whether any apply to your situation.