First-Time DC Buyers Can Save Thousands in Closing Costs

First-time buyers in DC could save thousands of dollars in closing costs starting October 1st!In DC, the cost to close on a home is typically 3% of the purchase price.  Those costs are made up of lender fees, title fees, and until now a recordation tax of 1.1% (for homes priced under $400k) or 1.45% (for homes priced over $400k) of the purchase price.

First-time buyers in DC could save thousands of dollars in closing costs starting October 1st!

In DC, the cost to close on a home is typically 3% of the purchase price.  Those costs are made up of lender fees, title fees, and until now a recordation tax of 1.1% (for homes priced under $400k) or 1.45% (for homes priced over $400k) of the purchase price.But, starting October 1st, there is an amendment to the DC Deed Recordation Tax Act.  The reduced tax rate of 0.725% can save eligible first-time homebuyers thousands when buying a home in the District.The required application and documents to be submitted by buyers for this reduced tax rate will be well worth the time and effort.But even sellers could benefit from this change as well since the reduced tax rate could cause a bump in home sales this fall.What’s the savings?Typical DC recordation tax rates are 1.1% for homes sold for $399,999 or less; and 1.45% for homes sold for $400,000 and above.Those rates now will be reduced from 1.1% or 1.45% to just 0.725%.  For example, rather than pay $6,525 in taxes for a $450,000 home, eligible buyers can pay just $3,262.50.What are the requirements?First-time District homebuyers of an eligible residential property. This can be either an improved residential property (i.e., land that has certain utilities and services such as electricity, telephone, water) or an economic interest in a cooperative unit. It includes buyers who have never owned District property as their principal residence as well as individuals who are divorced or separated and did not obtain ownership of a principal residence that had previously been jointly owned.Purchase price must be $625,000 or less for an eligible property.Income limits apply to the household of the applicant. Household income cannot be higher than 180% of the Area Median Income defined by the US Department of Housing and Urban Development:Applicant must apply and qualify for the DC Homestead Exemption. As such, the property must be occupied by the occupant as their primary residence after the purchase. The deed must be recorded on or after October 1, 2017. Applications for the reduced rate may not be made after the deed is recorded.Contact me for any questions on qualifying for this reduced recordation tax rate and how this change may affect your particular home purchase.