What We Offer First-Time Homebuyers
If your income has kept you out of the housing market, the Montana Board of Housing may be able to help you.
The Montana Board of Housing encourages all potential homebuyers to take a First-Time Homebuyer class to help determine if it is the right time, personally, for you to buy a home.
If you are a first-time homebuyer, you may be eligible for
- a competitive interest rate mortgage
- closing cost assistance
If you qualify, you may be eligible for a Mortgage Credit Certificate (MCC). This federal tax credit can lower your income-tax liability, dollar-for-dollar, leaving you more money to use toward your mortgage.
Our first-time homebuyer assistance is available statewide through participating lenders and their branches.
What are the terms?
We offer 30-year, fixed-rate FHA, VA, USDA, and HUD 184 mortgages at interest rates that are below or competitive with market rates to first-time home buyers. FHA loans are insured by the Federal Housing Administration; VA loans are guaranteed by the Department of Veterans Affairs for eligible veterans; USDA loans are guaranteed by U.S. Department of Agriculture for rural areas; and HUD 184 are insured by the Native American ProgramsDivision of the Federal Housing and Urban Development Administration. This insurance is paid to the lender if the buyer defaults on the loan. Loans are available through participating lenders.
Down payments are usually 0% to 3.5% of the sales price. VA and USDA loans offer 100% financing to qualified buyers.
The mortgages are available statewide.
- You must be a first-time homebuyer or not have owned a home and occupied it as your principal residence in the past three years. Current homeowners may qualify if they buy homes in targeted areas.
- You must plan to buy a home in Montana
- Your annual household income must not exceed the allowed limits.
- The home’s sale price must not exceed maximum allowed limits. The allowable sales price varies depending on local housing costs.
How does it work?
A 1% decrease in your interest rate could increase your purchasing power by approximately $15,000.
Here’s how it works:
Suppose your annual income is $44,000 and your car payment and other debts total $400 a month. You would have approximately $1,100 for your monthly house payment. Depending on where you live, your property taxes and hazard insurance will cost about $275, leaving you with $825 to pay the principal and interest on your mortgage.
The chart below shows what your purchasing power would be based on different interest rates. The lower the interest rate, the more you could borrow for a house.
|If your interest rate is:||You can afford:|
What are the terms?
Homebuyers who meet our qualifying income requirements, sales price, and first-time home buyer guidelines may be eligible for a Mortgage Credit Certificate (MCC). This federal tax credit was authorized by Congress to assist homebuyers with moderate and low incomes.
While all homeowners can claim an itemized tax deduction for mortgage interest, you can go a step further with an MCC. An MCC reduces your tax liability, dollar-for-dollar, by a percentage of the mortgage interest you pay.
If you qualify for an MCC, you will be able to claim 20% of the interest you pay on your mortgage as a credit on your federal income taxes. You can save up to $2,000 per year on your federal taxes, money that can be put toward your mortgage payment.
An MCC can be used with almost any type of mortgage, including adjustable rate mortgages. However, it cannot be used with the Montana Board of Housing's First-Time Homebuyer Mortgage.
Each lender sets the terms of the mortgage. This includes the interest rate, down payment, underwriting criteria, discount points, and closing costs. While we issue MCCs to qualified buyers, we do not act as a lender. MCCs are offered subject to availability of funds. Contact one of our participating lenders to initiate the process.
How does it work?
Suppose you qualify for an MCC and obtain a 30-year, 6.5% fixed-rate mortgage of $97,000. The first year’s interest payment is approximately $6,305. The MCC allows you to take a federal income tax credit of $1261.00($6,305 x20%) for that year.
If your federal income tax liability is $1,261.00 or more after you have taken all other credits and deductions, you receive the entire benefit of the MCC tax credit – $1,261.00. In figuring your taxes, you also claim a deduction for the remaining 80% of your mortgage interest.
If your federal income tax liability is less than $1,261.00 – $800, for example – your tax is reduced by only $800 that year. However, you can claim the remaining credit on tax returns for the next three years, if your tax liability increases.
You can receive an immediate benefit from your MCC tax credit by filing a revised W-4 (Employee’s Withholding Allowance Certificate) with your employer. In this example, your federal tax would be reduced by $105 a month ($1,261. ÷ 12). The extra $105 increases your take-home pay and helps make your house payments affordable.