The District, Maryland and Virginia offer plenty of classes and assistance programs to help homebuyers. (iStock)

The most difficult step for most first-time home buyers, according to research from the National Association of Realtors, is gathering the funds for a down payment.

In housing markets such as the Washington region, saving money to purchase a home can be doubly hard: Not only are homes expensive, requiring more cash for even a minimal down payment, but rents are also high, making it tougher to save at all.

Fortunately, there are a variety of homeownership programs to help buyers, including some open to people who have purchased before and others limited to first-timers. All of these programs are available only for people purchasing a primary residence, not an investment property or a vacation home.

“In high-cost housing markets like the D.C. area, there are a variety of programs available for down-payment assistance from nonprofit organizations and state housing finance agencies,” says Marietta Rodriguez, vice president of national homeownership programs for NeighborWorks America in Washington. “In addition, many financial institutions have special first and second mortgage products available through the Community Reinvestment Act.”

Unfortunately, many prospective buyers don’t know that they might qualify for one or more programs.

“Most people don’t identify themselves as low- to moderate-income buyers, so they self-select out of looking into their options,” Rodriguez says. “Regardless of your income, home-buyer-education classes are open to everyone and can help people learn about their financing options.”

Information sources for homeownership assistance

Michele Watson, director of homeownership programs for the Virginia Housing Development Authority in Richmond, says that in addition to taking home-buyer classes, which often are required for those seeking down payment aid and special loan programs, prospective buyers should check online for their state and local government housing office and housing finance agency.

“We have information about all of our programs, including income limits, on our site, and we also have a list of approved lenders who have experience with these programs,” Watson says.

Lisa Hensley, director of single-family programs at the D.C. Housing Finance Agency in Washington, says that buyers can find a list of lenders who participate in their homeownership programs on the agency’s website. DCHFA holds twice-monthly homebuyer seminars in which buyers can learn more about its programs.

In Maryland, prospective buyers can find fact sheets and lists of lender partners on the Department of Housing and Community Development website, says Tiffany Robinson, assistant secretary of the division of development financing and director of the community development administration of the Maryland Department of Housing and Community Development in Lanham, Md. The agency trains real estate agents in its programs so they can alert borrowers to the availability of homeowner assistance. Robinson says the agency partners with numerous nonprofit agencies to provide credit counseling, financial literacy and homeownership classes throughout the state.

“Housing counselors are valuable because they usually know about all the available programs and can do triage to help buyers figure out what they might be eligible for,” Rodriguez says. “A lot of people rely on their Realtors, but it can be hard for them to keep up with every program unless they specialize in affordable housing.”

Rodriguez says some programs from different sources can be layered to increase borrowers’ funds, so a housing counselor can help identify the variety of programs that could work together.

At DownPaymentResource.com, prospective buyers can enter information about where they want to buy a home, their income and household size to find a listing of programs for which they are eligible, including government and nonprofit programs.

Financial institutions, employers, and city and county governments often have programs for down payment assistance, low-cost mortgages or shared-equity arrangements that require buyers to repay some of the help they received when they purchased their home. In addition, D.C., Maryland and Virginia each have programs to assist homeowners.

D.C. programs

Home Purchase Assistance Program (HPAP): Administered by the D.C. Department of Housing and Community Development, this program provides financing assistance up to $50,000 and closing cost assistance of $4,000 for first-time buyers in the city,

“The funding ranges from $10,000 to $50,000, depending on household income,” says Polly Donaldson, director of the D.C. Department of Housing and Community Development. “The program is open to any city resident who is a first-time buyer and can meet the income and credit qualifications of the program.”

For example, a household with four people and an income of $120,100 could be eligible for $10,000; a four-person household with an income of $54,600 could be eligible for $50,000.

“The HPAP assistance is in the form of a 40-year loan with payments deferred for the first five years,” Donaldson says. “The goal is to make sure the payments are not an additional burden on the borrowers.”

In addition, Donaldson says there are programs for city employees, including deferred loans for up to $10,000 and closing cost assistance up to $1,500.

Buyers can apply for these programs through local housing counseling services and organizations such as Manna and the Latino Economic Development Corp. that can be identified through the DCHCD website.

DC Open Doors: The DC Open Doors program has provided $4 million in down payment assistance for more than 500 home buyers since it launched in 2013, Hensley says. The program is open to all applicants as long as they don’t currently own a home, are buying a home in the District and have an individual borrower income no more than $125,580. A credit score of 680 or higher is required for loans with a 5 percent down payment.

“These programs are often limited by household income, but because we base it on individual borrower income, the household income can be higher,” Hensley says.

Buyers who prefer to make a down payment can also take advantage of low-interest loans with lower mortgage-insurance requirements because they have been vetted by the DCHFA. Some loan programs require homeownership classes.

“We offer six different loan programs with and without down payment assistance,” Hensley sats. “The down payment assistance is up to 3 percent or 3.5 percent depending on the loan program so that buyers can have 100 percent financing.”

The second mortgage for the down payment is fully forgivable after five years.

“We forgive 20 percent of the loan per year, so if the buyers refinance or sell their home before five years have passed, they just repay the remaining balance,” Hensley says.

The second loan can be used for closing costs if desired. Hensley says some buyers are eligible for HPAP funds as well as DC Open Doors, or they can negotiate to have sellers pay the closing costs.

Mortgage credit certificate: DCHFA’s mortgage credit certificate, launched Thursday, 2016, allows eligible first-time buyers to use 20 percent of the mortgage interest they paid as a credit against the balance they owe on their income taxes. For example, Hensley says, if buyers owe $5,000 in income taxes and paid $10,000 in mortgage interest, they would be able to claim a credit of $2,000 and pay just $3,000 in taxes. The maximum household income to qualify for the tax credit is $133,040 for a household with one or two people.

Maryland programs

Maryland Mortgage Program: “The Maryland Mortgage Program is our flagship program, which provides a 30-year, fixed-rate deferred payment loan at 0 percent interest to cover down payment and closing costs up to 5 percent of the purchase price,” Robinson says. “It works almost like a grant, because buyers only repay it when they sell or refinance their home.”

The program also includes a low-interest first loan. Borrowers need to meet several eligibility requirements, including a maximum income in Montgomery and Prince George’s counties of $130,320 for a one- or two-person household, or $152,040 for a household with three or more residents. In addition, the maximum home purchase price is $429,620. At least one of the buyers must be a first-time home buyer, defined by the federal government as someone who has not owned a home in the previous three years.

Mortgage Credit Certificate: Similar to the D.C. program, home buyers are able to take an income tax credit up to a maximum of $2,000 of the mortgage interest paid on their loans through the Maryland mortgage program.

Partnerships with local jurisdictions: “We’re working with several local jurisdictions to create special initiatives with both state and local funding to support homeownership with grants of $2,500 to $10,000,” Robinson says. “Typically, the buyers need to be first-time buyers for these programs unless they are purchasing a home in an area targeted for stabilization or revitalization.”

Virginia programs

VHDA down payment grant: In Northern Virginia, first-time buyers with a maximum income of $97,520 for a household of one or two people, or $113,840 for a household with three or more people, can qualify for a down payment grant of 3 percent or 3.5 percent of the home price. The maximum home price to qualify for the grant is $500,000.

“In Northern Virginia, most of our buyers opt for a Fannie Mae loan with a 3 percent down payment requirement and no mortgage insurance,” Watson says. “Borrowers need to have reasonable credit, with a FICO score of 660 or above and need to demonstrate that they can repay the loan.”

VHDA FHA Plus program: First-time buyers who don’t qualify for the grant program may be eligible for an FHA Plus loan, which provides a down payment of 3 to 5 percent in the form of a second mortgage loan which is repaid over 30 years at a low interest rate. The maximum income for FHA Plus in Northern Virginia is $121,900 for a household with one or two people or $142,300 for a household with three or more people. The maximum eligible home price is $500,000.

VHDA mortgage tax credit certificate: First-time buyers who use VHDA loan programs to buy their home and meet the income and home price criteria of the FHA Plus program also are eligible for a mortgage credit certificate. “The tax credit can be used for the entire time the borrowers keep their loan and gives them a credit — which is better than a deduction — on their federal income taxes for the first 20 percent of the mortgage interest they pay,” says Watson. “They can still take a deduction on the other 80 percent of the mortgage interest paid. You can only use this credit if you have an actual tax liability, but many borrowers in Northern Virginia, who tend to have higher incomes, are able to use the credit.”

Finding an affordable home

Once borrowers have their financing in place, they still face the challenge of finding an affordable home to buy in a region where the median price climbed to $419,250 in April, according to data provided by ShowingTime RBI based on listing activity from MRIS, the region’s multiple-listing service.

“Some of the down payment assistance programs haven’t been all that successful in helping a broad range of buyers because getting $3,000 toward your financing is frankly a drop in the bucket for this area,” says Lisa Sturtevant, president of Lisa Sturtevant & Associates, an affordable-housing consultant in Alexandria. “Local jurisdictions have tried a scattershot approach, but no one has really solved the affordable-housing issue.”

Sturtevant says inclusionary zoning, which requires new developments to incorporate a percentage of homes at a lower cost for low- and moderate-income families, is increasingly in use, but she says no one has quite figured out how to handle condo fees for the lower-income buyers. If the condo fees increases, as they often do, the home becomes less affordable for those buyers.

The D.C. government initiated an inclusionary zoning program that mandates that 8 to 10 percent of newly constructed housing, including both rentals and condos, must be set aside for people who make 50 to 80 percent of the area’s median income, or about $60,000 to $80,000 for a family of four, Donaldson says.

“Buyers interested in that program need to attend a registration session and enter a lottery,” Donaldson says.

“Among the many initiatives of the D.C. government is to support organizations such as Habitat for Humanity and Manna and others with funding for the development of more housing for low- to moderate-income households,” Donaldson says.

Sturtevant says Montgomery County has set the “gold standard” for the rest of the country with its regulations to include MPDUs (moderately priced dwelling units) in new developments.

“Maryland is one of a handful of states that have combined our housing finance agency and community development department so that we blend financing mortgages and financing of multifamily affordable housing in one office,” says Kenneth Holt, secretary of the Maryland Department of Housing and Community Development. “We work to build sustainable communities on every level and have successfully connected people who want to become homeowners but have a shortfall with the capital they need through down payment assistance.”

In Northern Virginia, Sturtevant says, most of the new development since inclusionary zoning was introduced has been in the rental market.

“One thing that could increase the availability of affordable housing is to change zoning rules to allow smaller homes on smaller lots in suburban jurisdictions,” Sturtevant says.

Finding the right financial assistance and an available, affordable home requires persistence and due diligence.

“No one is born knowing how to a buy a home, and taking a homebuyer class is a great way to pick up important knowledge from a neutral source and to be a savvier buyer,” Rodriguez says.

Here are links to mortgage assistance programs in the area:

●Down Payment Resource: downpaymentresource.com

●HUD Housing Counselors: hudexchange.info/programs/housing-counseling

●NeighborWorks America: neighborworks.org/Homes-Finances/Homeownership

D.C. resources:

DCOpenDoors.com

DCHousingSearch.org to search for affordable homes

dhcd.dc.gov/node/10362 for HPAP information

Maryland resources:

mmp.maryland.gov/Pages/Products.aspx

montgomerycountymd.gov/DHCA/housing/singlefamily/mpdu/index.html about Montgomery County MPDUs

Virginia resources:

VHDA.com