How to Take Advantage of First-Time Homebuyer Incentives in Downey, California

As one of Los Angeles County’s best-kept secrets, Downey offers quality homes in an idyllic urban-suburban setting. Before you start your home buying journey, here’s what you need to know about home buyers incentive programs in the area.

How assistance programs incentivize homebuyers

Although the local housing market offers more options than traditionally expensive markets like the City of Los Angeles and similar areas in Los Angeles and Orange counties, home prices in Downey are still higher than the national average. According to Realtor, the median listing home price was $820,000, or $529 per square foot, in August 2022, up 9.3% year-over-year. The city’s proximity to DTLA and other Los Angeles landmarks is one of the main drivers of housing demand in the area.

So how can first-time homebuyers enter the market despite high property values and interest rates? This is where home buyers’ incentive programs like the Mortgage Credit Certificate come in. These programs make it easier for buyers to afford a home in the area.

How do home buyers’ incentives work?

In general, first-time homebuyer assistance programs make homeownership more accessible by reducing the down payment, closing costs, or monthly mortgage payments on a home. These programs provide tax breaks or energy credits to help ease the financial burden of homeownership. Some programs also allow first-time homebuyers to withdraw up to $10,000 from IRA funds to cover housing-related costs without the 10% penalty. Common examples include low- or no-down-payment loans, credit certificate programs, and federal and state grants.

There are also three government-backed loan options for first-time homebuyers in the United States, namely the Federal Housing Authority (FHA), United States Department of Agriculture (USDA), and Veteran Affairs (VA) loans, each with its own requirements and eligibility criteria.

First-time home buyers incentive programs in Downey, CA

If you’re buying your first home in Downey, check out these home buyers’ incentive programs for assistance:

• The Mortgage Credit Certificate (MCC) Program provides Federal income tax credit to help lower the potential income tax liability of Downey’s first-time homebuyers at the Federal level. This tax credit creates an additional net spendable income that can be put towards monthly mortgage payment and other housing-related expenses.

  Under the MCC Program, eligible homebuyers can convert up to 20% of their annual mortgage interest paid on their mortgage loan into a tax credit on their individual income tax returns. This a direct, dollar-to-dollar tax credit that can be used to cover other housing costs. The remaining 80% of their mortgage interest will qualify for itemized tax deduction for the remainder of the loan’s life cycle.

• The City of Downey and the Neighborhood Housing Services (NHS) First-Time Homebuyer Program assists low-to-moderate income Downey residents who want to purchase a home in the city. The city will offer deferred loans of up to $40,000 with the NHS matching the loan for a total of $60,000. This loan has a 3% interest rate and a 30-year term. The interest will be forgiven at just 1/10th rate per year after the 20th year while the city’s original loan amount and interest rate will be forgiven past the 30th year.

  To qualify for the program, your income must be at – or fall below – the 80% Area Median Income (AMI). You must qualify for a primary mortgage loan with a 3% down payment and attend a homebuyers’ education counseling class. The HUD also sets a maximum value limit on the purchase price of the home. The entire loan amount plus interest must be paid if you sell the home, refinance your mortgage, change the title, or stop using the home as a primary residence.

  The NHS plans to approve at least seven eligible homebuyers for the program. Downey residents will get first priority for the loans, followed by aspiring homebuyers who work in the city.

• Senate Bill (S.B.) 457 will create a tax refund of $1,000 to $2,500 long-time California residents who are low-income, don’t own a car, and are 16 years or older beginning in January 2023. The bill limits the total amount of the tax credit per household to $7,500. While it is not limited to first-time homebuyers, this tax rebate can help cover housing-related expenses. To be eligible, single filers must earn less than $40,000 annually while joint filers must earn less than $60,000.

How to apply for home buyer incentives

In most cases, you can be eligible to apply for a first-time home buyer program if you haven’t owned your primary residence within the last three years. Additionally, the the U.S. Department of Housing and Urban Development (HUD) defines a first-time homebuyer as an individual who meets any of these criteria:

• Single parents who have only owned a primary residence with a former spouse while still legally married.

• Displaced homemakers who have only owned a primary residence with a spouse.

• Homebuyers who have only owned a primary residence that is not permanently affixed to a permanent foundation (i.e. manufactured or mobile homes).

• Homebuyers who have only owned a property that was not in compliance with local, state, and model building codes, and can’t be remodeled or renovated into compliance for less than the cost of building a permanent structure.

To be approved for a mortgage, you’ll need to meet income and credit score requirements. In general, applicants must provide proof of income and tax returns from the last two years and sufficient cash reserves for the down payment and closing costs.

The impact of homebuyer incentives

According to Habitat for Humanity, it has historically been more difficult for lower-income homebuyers and people of color to enter the housing market. Assistance programs serve to make home buying more affordable as well as reduce the wealth divide.

Do programs help with property tax?

The Los Angeles County Assessor’s Office offers a homestead exemption of up to $7,000 from the assessed value of a property. You may be eligible if you own your home and it serves as your principal place of residence on January 1. New homeowners typically receive a Homeowners’ Property Tax Exemption Claim Form after taking ownership of their primary residence.

Common first-time homebuyer concerns in Downey, CA

When buying a home in Downey, you may face challenges in the following areas:

• Financing – Securing financing is one of the most common challenges in buying a home. Applying for a home buyers incentive program based on your eligibility can help make home ownership more affordable.

• Property search – Many buyers don’t know where to start their search. Aside from browsing online, you can cast a wider net by working with a real estate professional who can provide access to listings that fall within your price range. Let them know about your needs and preferences in a home so that they can present listings that match the criteria of your chosen home buyers incentive program.

• Negotiations – When the seller accepts your offer, you will enter negotiations with the other party. Negotiations can be challenging when dealing with high-conflict sellers, or if you can’t see eye-to-eye on important matters. An experienced real estate professional will bring objectivity and help you stay level-headed throughout. They will advocate for your interests during negotiations and make sure that you get a fair deal.

• Home inspection – What should you do in the event that the home inspection uncovers major defects in the property? If this happens, you’ll need to go over your options during this time. For one, you can negotiate with the seller’s representative for repairs, a repair allowance, or a price reduction before proceeding with the sale. You may also have the option of withdrawing from the transaction altogether depending on the severity of the defect. Talk to your real estate partner about the best course of action.

Downey, CA real estate overview

Applying for a home buyers incentive program will make a wider range of properties available to you. Downey offers a diverse array of single-family homes, townhomes, and condos. The vast majority of homes for sale are single-family homes with three to four bedrooms. The most desirable properties are situated on large lots with driveways and manicured greens. Prevalent architectural styles include Ranch, Bungalow, Contemporary, Mid-Century Modern, and Spanish Revival.

Downey offers an excellent mix of older and new construction homes. Some of the older homes in the city were built around the 1950s and have been updated to include modern features such as new countertops and HVAC systems. Likewise, there is also a selection of turnkey-ready, newly constructed homes with modern designs and features.

However, most first-time homebuyers’ assistance programs may not cover luxury properties, which typically command upwards of $1 million to more than $2 million in the city. These properties fall outside the median price due to distinctive features like square footage and amenities. Some of the most expensive homes in the area come with outdoor pools, landscaped gardens, wide driveways, and two-car garages.

Downey, CA at a glance

Once a ranching and farming community, Downey is best known for its contributions to aviation and aerospace, particularly Project Apollo. It is also home to the oldest McDonald’s branch in the world. As an integral part of the Gateway Cities between Los Angeles and Orange counties, it is conveniently situated roughly 8.5 miles from Long Beach (LGB) Airport and 15.9 miles from Los Angeles (LAX).

Located in the southeastern portion of Los Angeles County, roughly 13 miles southeast of downtown Los Angeles (DTLA) and 10 miles east of the Pacific Ocean, Downey is home to a population of 111,263 as of 2020 census estimates. The city encompasses 12.6 square miles with 26 constituent neighborhoods, including:

• Gallatin is a laid-back neighborhood with upscale homes and green spaces. It also provides easy access to shops, offices, and restaurants at The Marketplace at Gallatin Road.

• Pico Vista is an affluent enclave with large properties and well-maintained sidewalks. Some of the most sought-after homes along Pico Vista Road have swimming pools, wide driveways, and plenty of outdoor space. The neighborhood also offers easy access to shopping, dining, and entertainment venues like the Dodger Stadium.

• The Island is one of the most established neighborhoods in Downey. It has some of the highest property values in the city along with an exclusive selection of luxury homes.

• Appleby is known for its picturesque bungalows and Spanish Revival homes with grassy lawns. Located in the northeast section of the city, this neighborhood provides quick freeway access and is within close proximity to parks and schools.

• Pomering harbors a gorgeous selection of bungalows with mature landscaping. As one of the most coveted neighborhoods in the city, Pomering has peaceful, tree-lined streets, foodstands, and exciting restaurants.

Why choose Downey, CA?

Reputable schools. Downey is known for its school district, which has earned multiple California Distinguished School Awards over the years. Downey Unified School District (DUSD) provides quality education and other related services to more than 22,000 students in grades K-12. Click here for a list of schools in and around Downey.

Accessibility. The city provides easy access to the Southern California freeway system, including several major freeways:

• Interstate 5/Santa Ana Freeway (North Downey)
• Interstate 605/San Gabriel Freeway (East Downey)
• Interstate 710/Long Beach Freeway (West Downey)
• Interstate 105/Century Freeway (South Downey)
• Route 91/Artesia Freeway (3.5 miles south of Downey)

Community spirit. Downey is an “All America City” with a strong sense of community, volunteerism, and civic pride. This can be observed in various community events and seasonal celebrations, such as the Downey Street Faire and Annual Holiday Lane Parade. The local YMCA is staffed by volunteers and contributors.

Business opportunities. Downey is a great place to do business, having landed a coveted spot in the top 25% in the “100 Best Cities to Do Business in California” by California Business Magazine. It consistently ranks among the best cities for businesses in Los Angeles and Orange counties. The city also offers commercial real estate for prime retail space, modern offices, and industrial development.

The city has a robust business climate with about 2,700 companies in service, retail, and manufacturing. These companies provide approximately 47,000 jobs in Southern California. The Downey Chamber of Commerce is an important part of the community, organizing and sponsoring community events as well as offering support to entrepreneurs.

Food scene. It’s no secret that Downey has some of the most exciting restaurants and food stands in Los Angeles County. From Argentinian steakhouses and sushi joints to high-end sports bars and fine dining restaurants, the city has it all. Here you’ll find restaurants serving New American, Tex-Mex, Mediterranean, Italian, and Fusion cuisine.

How to overcome the challenges of home buying for the first time

When buying a home in Downey, be prepared to make a strong offer and enter negotiations with the seller. Refining the search process will also increase your chances of finding a property that ticks all the boxes. Aside from familiarizing yourself with median home prices and first-time home buyer incentive programs, being aware of current market trends and recent sales in the area will help you determine how to choose the right property. A real estate agent can provide access to recent market data for a more informed approach to the buying process.

The importance of working with a real estate professional

When buying in a seller’s market like Downey, buyers will benefit from the guidance of a local expert. Some of the advantages of working with a real estate professional include:

• Knowledge and expertise – A buyer’s specialist has in-depth knowledge of the home buying process, providing guidance on everything from financing to negotiations. They have access to market data on comparable properties and recent sales. They can also provide access to exclusive listings to help you choose the right property. Their experience enables them to identify, anticipate, and overcome the challenges of buying a home in today’s market.

• 24-hour affiliation – Real estate agents and sales associates have access to a vast network of industry professionals that can provide related services. They can refer you to mortgage lenders, contractors, homeowners’ insurance companies, certified home inspectors, and more.

• Genuine solutions – Real estate professionals aim to provide solutions to the challenges of buying a home in a competitive and dynamic market. Aside from making referrals and recommendations in real estate, they can offer practical advice on local schools, property tax rates, home improvements, and other topics depending on your needs and requirements.

Find the home of your dreams with 24 Hour Real Estate

Real estate is a 24-hour business. We work around the clock to protect your interests. You can reach us 562.818.6111 or send us an email for any questions you may have about listings, paperwork, home prices, and more. We are a team of residential sales specialists who’ve facilitated over 1,500 home sales since 1999. Our company is led by Realtor and broker associate Michael Berdelis, who has been the #1 agent in Downey since 2002. We can’t wait to help you find your dream home in Downey and the surrounding areas.