House Key State Bond is a Washington State sponsored first time home buyer financing program that focuses on educating potential mortgagees so the mortgagees are able to qualify for government subsidies. These subsidies can then be used to buy down mortgage points. This is excellent news for Washington residents that are looking to purchase their first home with little money down, similar to the USDA program.
House Key State Bond has some requirements as well as restrictions.
1. Home buyers must attend a free home buyer education seminar.
2. Home buyers can get receive downpayment assistance.
3. Home buyers must stay within a maximum acquisition cost limit.
4. Home buyers maybe subjected to a recapture tax.
5. What are the targeted areas for acquisition cost limits.
Why should first time home buyers choose House Key State Bond over another financing option?
House Key State Bond is specifically designed for the first time home buyer. First time home buyers, on average, have more difficulty qualifying for low interest rates than the move-up buyer or investment home buyer.
How does Washington raise the funds for House Key State Bond?
Washington State sells tax-exempt bonds to fund the House Key State Bond program and sales are scheduled to overlap so there is no gap in the funding process.
What is the home buyer education seminar?
Home buyers must attend a free home buyer education seminar to qualify for the House Key State Bond government financing program.
The home buyer education seminar is a course in which is designed to educate home buyers on the following topics: home buying process, lender curriculum (how much you can afford, what lenders look for and how you can improve your chances for a better terms on a home loan), real estate curriculum (why a real estate agent is important and what to know before you start the home search).
What constitutes completion of the home buyer education seminar?
The completion of the home buyer education is dependent on the passing of an exam at the end of the course. The exam is in scantron format (which will be provided) and must be completed in a designated time period.
Who instructs home buying education seminars?
Home buying education seminars are taught all over the state by various certified mortgage planners. Within Snohomish County’s borders the home buying education seminars are available and inquire for a list of classes and times.
Down Payment Assistance
There are four different programs offered under the House Key State Bond program.
1. House Key Plus Program
2. Home Choice Program
3. House Key Veterans Program
4. House Key Schools Program
House Key Plus Program
Borrowers can receive a second mortgage at a 5% interest rate with a ten year term to generate their downpayment. Though the program varies across the state, Snohomish County residents can receive up $7,500 if the borrower does not exceed the maximum annual income limit, is a first time home buyer or lives in a targeted area and the loan is one of the following; FHA House Key Loan, House Key Teacher, MyCommunityMortgage, MyCommunityMortgage 40 year, My CommunityMortgage Interest Only, Freddie Mac Home Possible 100 or Freddie Mac Home Possible 97.
Home Choice Program
Borrowers with a disability or first time home buyers (or live in a targeted area to qualify) that have a family member with a disability living with them can qualify for a 1% interest on a second mortgage loan for downpayment assistance. Home buyers must have already qualified for a Fannie Mae Conventional 30 year, 40 year or Interest Only House Key State Bond first mortgage, meet the maximum acquisition cost limit and annual income limit.
House Key Veterans Program
To be eligible for the House Key Veterans program persons must have been honorably discharged or received a discharge for medical reasons with an honorable record, enlisted personnel and honorably discharged personnel of the Washington National Guard and Reserve; and never remarried spouses and dependent children of deceased Veterans. Borrower must be first time home buyers (or live in a target area to qualify), meet the maximum acquisition limit, maximum income limit and have a first mortgage that is either a VA, FHA House Key Loan, House Key Teacher, MyCommunityMortgage, MyCommunity Mortgage 40 year, MyCommunityInterest Only, Freddic Mac Home Possible 100 or a Freddie Mac Home Possible 97.
House Key Schools Program
To be eligible for 3% interest rate and a ten year term under the House Key Schools program borrowers must be one of the following: teacher and employee of community or technical colleges, K-12 teacher, a private school that is accredited and/or recognized by Washington State. Borrowers must also be first time home buyers (or live in a targeted area), meet the maximum acquisition limit and income limit and have a first mortgage that is either a FHA House Key Loan, House Key Teacher, MyCommunityMortgage, MyCommunity Mortgage 40 year, MyCommunityInterest Only, Freddic Mac Home Possible 100 or a Freddie Mac Home Possible 97.
What are the Targeted Areas for House Key State Bond?
Through census tracking, Washington State has determined the following areas as economically distressed and people buying homes in these areas DO NOT have to be first time home buyers. This makes House Key State Bond a very good choice for people purchasing homes in these areas.
Income and Acquisition Limits
Home buyers looking to qualify for the House Key State Bond program and/or downpayment assistance must stay with the maximum income limits and can not purchase more than the maximum acquisition limit.
Snohomish County Maximum Income Limits
Snohomish County Maximum Acquisition Limits
Federal Recapture Tax
At first, the Federal Recapture Tax may seem like an avenue for big brother to work his way in the working family’s wallet. But this is not actually the case with the Federal Recapture Tax and according to Washington State; “Our experience has shows that very few borrowers will be affected by the recapture tax”.
No Federal Recapture Tax if:
1. Sell your home after 9 years
2. Sell your home with no gain
3. Your income falls within the Federal Income Limits
But these three statements do no fully clarify and answer questions of what the Federal Recapture Tax is. Washington State sells tax exempt bonds to fund the House Key State bond program and the recapture tax to provide first time home buyers with a lower interest rate. Typically the recapture tax is paid upon the sell of the borrowers home and for the tax to apply all three must apply.
1. Your home is sold or disposed of within 9 years of being purchased, for reasons other than your death
2. There is a capital gain on the sale of your home
3. Your household income for the year in which you sell your home exceeds federal recapture tax limits
So, if your current selling situation does not fall within these categories then you are exempt for paying the state’s recapture tax.
But what if you do not fall within these requirements what will recapture tax be and how is it calculated?
In the event the borrower has to pay the recapture tax, the tax will only be a portion of the capital gains on the sale of the property. The state has set the maximum amount to be recaptured at 50% of the gain or 6.25% of the “original loan amount”, whichever is less. That is excellent news for the borrower because they can be either not pay the recapture or pay a portion back to the state for the lower interest rate.
Another way to avoid the recapture tax is meeting the Federal Adjusting Qualifying Income Limits for calculating Recapture Tax. So what determines the income limits? Income limits are based on three things;
1. Your household size at the time the home is sold or transferred
2. The year you purchased the home
3. Whether your home is in a targeted area
Curious about qualifying? Contact us and we’ll get you started.