With young adults graduating from college with an average of 37K of debt, buying a first home has taken a backseat while many struggle to pay off student loans. Coincidentally, states left with a surplus of foreclosed homes in the wake of the housing collapse are short on buyers. Many states are coming up with creative solutions to encourage first time mortgage seekers to make a deal.
The state of Maryland is offering to wipe out student debt in exchange for purchasing a home owned and maintained by the state’s housing department. The SmartBuy program uses an innovative model to clear the path to home ownership for those who would otherwise have difficulty when adding a mortgage on top of student loans. If a buyer has 5 percent as a down payment, the state will provide up to 15 percent of the purchase price toward outstanding student loans. At a glance, a home buyer with $35K in student loans wanting to purchase a home for $200K could be looking at $30K (15%) in student loan forgiveness under the program.
Maryland is among only a small number of states trying to increase home ownership for millennials graduating college. Ohio’ s “Grants for Grads” is offering down payment assistance and lower mortgage rates to first time buyers. Farther east, Rhode Island’s “Ocean State Grad Grant Program” provides $7K to buyers who have recently graduated college.
Not to be outdone, the Illinois Housing Development Authority offers $5,000 in down payment assistance, federal tax credit certificates, and lender-paid mortgage insurance to first-time home buyers who contribute $1,000 or 1 percent of the purchase price – whichever is greater. Another program provides $7,500 in down payment assistance and 30-year competitive, fixed-rate mortgages for first time home buyers in various counties.
With tough financial times, many parents worry that their children will struggle to make ends meet and wonder if they will ever be able to afford a home, particularly when they have sizable student loan debt weighing them down. It is certainly worth researching what programs may be available in your state designed to help young people get a start all the while providing the state with rising stars to shape their communities.
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