South Carolina has offered many ways to help home buyers, and one of the latest programs sounds like a particularly good one for both first-timers and people who are relocating in-state or trading up.
March and April are the peak months for home showings in the Charleston area, so this is a great time to learn about the S.C. State Housing Finance and Development Authority's "Palmetto Home Advantage" program.
It's only about six months old, and word's still getting out about it. Anyone thinking about buying a home should consider this option, available to those with incomes up to $87,500 and a minimum FICO credit score of 640.
The main incentive Palmetto Home Advantage offers is forgivable down payment assistance of up to 5 percent of the purchase price.
It's money the borrowers won't have to pay back, as long as they live in the home for at least 10 years. If they sell before then, the money must be repaid, but there's no interest charged on it.
Second — this is important, and very valuable — Palmetto Home Advantage can be used in combination with a mortgage credit certificate. An MCC is something you get through a participating lender before completing a home purchase, and it opens the door to federal tax credits worth up to $2,000 every year that you make mortgage payments on that home.
Those two programs, used together, could be worth $32,500 over 10 years, for someone who buys a $250,000 home.
I have been amazed by the lack of people taking advantage of mortgage credit certificates, probably due to lack of knowledge about them. Statewide, just 127 MCCs were issued in 2018.
Consider: Last year more than 18,000 homes were sold in just the tri-county area. Here's how many mortgage credit certificates were obtained in Berkeley, Charleston and Dorchester counties in 2018, respectively: 29, 17, and 11.
How many thousands of those Charleston-area home buyers could be getting $2,000-per-year tax credits right now? That's millions of dollars that could be helping area residents, and the economy, year after year.
The mortgage credit certificate is unusual because it's a federal tax credit, but it's only available to residents of states that have made it available, as South Carolina has since 2012.
It's also unusual because it's a tax credit tied to mortgage interest payments, but you can't claim that federal tax credit unless you obtain an MCC before completing the purchase of a home that will be your main residence.
The mortgage credit certificate is separate from the Palmetto Home Advantage program, but they can be used together. The MCC has its own restrictions on incomes and home prices, but they're fairly generous.
For example, in Berkeley County the MCC income limit for one or two people is $86,640, and that rises to $101,080 if there are three people in the household, including children.
So both Palmetto Home Advantage and the MCC are available to people with incomes well above average in South Carolina.
Palmetto Home Advantage doesn't limit the price of a home that can be purchased, but the MCC program does. For example, the price limit on a Berkeley County home purchased in connection with an MCC is $295,000.
The median price of a home sold in Berkeley County last year — half sold for more, half sold for less — was $238,000, according to the Charleston Trident Association of Realtors' annual report.
Now, pursuing the down payment assistance and a mortgage credit certificate involves working with approved lenders, and some extra paperwork and red tape a home buyer would not have to deal with otherwise, but the payoff is substantial.
Five percent of a $250,000 home purchase is $12,500, and that's money the buyer won't have to repay after a decade in the home. And over that same decade, having an MCC would be worth up to $20,000 in federal tax credits.
Want to learn more? Visit schousing.com or call 803-896-2211.