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Information for First-Time Idaho Homebuyers

In Idaho, first-time homebuyers are buyers who haven’t owned a primary residence in the last three years.

With people moving to Idaho and the Treasure Valley in droves and housing availability is minimal, it seems that the area wouldn’t necessarily be a good fit for first-time homebuyers. According to a report that came out at the end of 2020 by financial guidance company, SmartAsset, Boise was among the best cities for first-time homebuyers.

The report examined four unique categories: home market favorability, affordability, livability, and employment. Nearly half (46%) of the people who own homes in Boise are under 45. The home market favorability component looks at price-to-rent-ratio, the five-year home value appreciation, and the area’s foreclosure rate. Home value appreciation has tripled since 2010, so people who have owned their homes for a while have seen substantial returns on their investments.

New Idaho Law for First-Time Homebuyers

During the 2020 legislative session, Idaho state legislators passed a law that allowed first-time homebuyers in Idaho an opportunity to save up to $15,000 per year (or $30,000 for joint filers) for the purchase of their first home, using a first-time homebuyer savings account. The saved funds can be used for the down payment, appraisal, closing costs, or anything associated with the closing costs of their first home. An added benefit of this legislation allows the annual savings to be deducted from their Idaho taxable income.

A handful of banks and credit unions are currently participating in the first-time homebuyer savings account program. They include First Federal Savings Bank, Bank of Commerce, Williamette Valley Savings Bank, Idaho Central Credit Union, CapEd, Spokane Teachers Credit Union, and Westmark Credit Union. If your institution isn’t listed, check with yours to see if they plan to offer the program.

Working Remotely Appeals to First-Time Homebuyers

Due to the pandemic, many companies allow their employees to work remotely, and a recent study by Upwork shows that nearly 25% of workers are now working out of the office. The Boise area appeals to many people as it offers excellent Internet connectivity and housing options that are not part of a large metropolitan area. People who are moving here to the area are looking for homes. With the various available assistance programs, Idaho and the Treasure Valley are especially attractive for first-time buyers.

Lenders Have First-Time Homebuyer Programs for Mortgages

Many lenders have access to programs that can put homeownership in reach to many people. Many of their programs provide direct assistance to first-time homebuyers allowing them to buy property without necessarily putting a lot of money down on the purchase.

Let’s explore some of the available options.

FHA Loans

A Federal Housing Administration loan or “FHA” is insured by, you guessed it, the Federal Housing Administration and helps limit lenders’ risk. These loans require a modest 3.5% down payment, making them a good option for first-time homebuyers. This program is generally a good one for borrowers with lower credit scores – those at 580 or above. The FHA will insure loans for borrowers with scores as low as 500 but require a 10% down payment. Mortgage insurance will be necessary for the life of the loan and cannot be canceled.

VA Loan

VA Home Loans are backed by the Veterans Affairs Department and are available to current service members, veterans, and eligible surviving spouses. These loans are usually low-interest and require little to no money down for qualified borrowers, and rarely need mortgage insurance. There is no official minimum credit score requirement, but most lenders require a score of at least 640 to qualify.

USDA Loans

The United States Department of Agriculture’s (USDA) Rural Department strives to build and support rural communities by providing USDA-backed mortgages. These homes require no money down and are low-interest, helping lower-income families find affordable housing. There are income limitations associated with this loan, and applicants with credit scores above 640 have a more streamlined application process. Those with lower scores will have to meet more stringent underwriting requirements.

Conventional Loans

First-time homebuyers can get a conventional home loan with as little as 3% down if the mortgage meets standards set by Fannie Mae and Freddie Mac.

Idaho Housing Finance Association Loans and Programs

The Idaho Housing and Finance Association offers loans through a network of approved lenders for first-time homebuyers. They can also assist with down payments and closing costs. The organization also has a tax credit program that’s available statewide to first-time buyers in specific counties.

Fannie Mae HFA Preferred/Freddie Mac FHA Preferred

These programs, offered by IHFA, allow for down payments as low as 3% and can also include down payment assistance. Private Mortgage Insurance (PMI) may vary based on the income of the borrower. This program may also require homebuyer education.

First Loan FHA/VA/USDA

The First Loan programs offer FHA, VA, and USDA mortgages with reduced interest rates to buyers who have not owned a home in Idaho’s “non-targeted” counties in the past three years. The sale price and income limits apply to these loans. The state’s homebuyer tax credit program is not available with these loans.

Forgivable Loan for Down Payment / Closing Costs

This program provides a grant to help with down payment and closing costs in the form of a zero-interest forgivable loan. After four years, the loan starts being gradually forgiven, and after seven years, it’s entirely forgiven if the program’s terms are met. Borrowers will have to contribute .5% of the sales price toward the home’s purchase.

Second Mortgage for Down Payment / Closing Costs

This program provides a loan at 5% interest over ten years to help with a down payment closing costs associated with a home purchase. Borrowers can qualify for a loan of up to 3.5% of the home’s sales price or appraisal value (whichever is less) but depends on the type of mortgage chosen. Borrowers are required to contribute at least .5% of the sales price toward the purchase.

Homebuyer Tax Credit

The first-time homebuyer tax credit is available for all homebuyers in specific (targeted) counties. The program lets a homebuyer get a federal tax credit of up to $2,000 annually for mortgage interest paid each year.

The Last Word

As you can see, there are a lot of first-time homebuyer programs and opportunities available in Idaho. Please speak with a mortgage lender or the Idaho Housing Finance Association for specific information about the available mortgage programs. It’s also wise to talk with a tax professional to understand what types of credits are available for taxpayers.

Also, you want to make sure you’re financially ready to take on the responsibility of owning a home. Make sure you’ve run the numbers and are aware of the homeownership expenses that you may have in addition to a mortgage. And check out our home buying guide which gives tips and advice regarding the home buying process. Most importantly, work with a REALTOR® to help guide you on your journey to buying your first home.

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Get in touch with an agent to start your journey home.

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