Slade column: More down payment and mortgage assistance options for potential home buyers

Written By David Slade dslade@postandcourier.com Apr 30, 2017,  Post and Courier A little help with downpayments and closing costs could make all the difference for lower-income home buyers. For potential homebuyers with lower than average incomes, there's a South Carolina bank offering down payment and closing-cost assistance that could make the difference necessary to make ownership a reality. This may sound familiar, because I've written recently about homebuyer assistance from the S.C. State Housing Finance and Development Authority, but these homeownership programs are offered by Florence-based First Reliance Bank, using funding from the Federal Home Loan Bank of Atlanta. There are a few variations of First Reliance's programs, but each of them offers thousands of dollars in financial help to buyers with incomes that don't exceed 80 percent of the area's median income, depending on family size. So, the income limits vary depending on where the applicant lives, and the size of their family, but here are some examples of how that works out. For a single individual, or a household of two, three, or four, here's what 80 percent of median income (the income limit) looks like in different parts of South Carolina: • Charleston, Berkeley and Dorchester counties: $38,192, $43,648, $49,104, or $54,560. • Lexington, Richland, Calhoun, Fairfield and Saluda counties: $35,950; $41,050; $46,200; or $51,300. • Horry County: $31,400; $35,900; $40,400; or $44,900. If you're household income doesn't exceed the limits, for the county where you live, First Reliance has three different programs that could potentially help with buying a home. For any qualifying first-time buyer — meaning you haven't owned a home in the last three years — the bank offers up to $5,000 in assistance. Those employed in certain "hometown heroes" professions don't have to be first-time buyers, and are eligible for up to $7,500. Veterans are also eligible for up to $7,500, or $10,000 if they have served in "an overseas military intervention for any branch of the U.S. military." In the first-time buyer and "heroes" programs the basic rules are the same. The buyer must be planning to occupy the home as their primary residence, and must take a homebuyer education and financial literacy course. The buyer also must contribute at least $1,000 toward the purchase, and the assistance comes as a 4-to-1 match, so $1,875 would be required to get $7,500. The assistance money comes as a forgivable loan, which means that after living in the home for five years, you wouldn't have to pay any of it back. The veteran programs don't require matching funds from the buyer, and surviving spouses of veterans also qualify. Crucially, and unlike the State Housing Finance and Development Authority programs, the First Reliance buyer assistance can be used in conjunction with a mortgage tax credit certificate, which is worth up to $2,000 every year of homeownership. An MCC — which must be obtained before completing the purchase of a home — allows the homeowner to claim a federal tax credit for 50 percent of the mortgage loan interest they pay each year, up to $2,000. As with the S.C. State Housing Finance and Development Authority options I've written about previously, the First Reliance assistance can allow a qualifying buyer to purchase a home with very little, if any, money down. That's a great help for people struggling to save up a down payment, but can also expose the buyer to risk. With little money down, if the real estate market takes a dip the buyer could wind up owing more than the house is worth. That can turn into a big problem if the owner needs to sell, as we saw during the housing meltdown and recession. These products appear well-suited for buyers who are confident that they will be living in the home they hope to buy for at least five years. After five years, their buying assistance money would be fully forgiven, and through regular mortgage loan payments they would have built up equity in the property.