By ALEX JACKS
For the first-time homebuyer, the real estate market can be a bit overwhelming. There are numerous financial considerations new buyers must contemplate, which in the past have prevented many from buying a first home.
In an effort to encourage Mississippians to take the plunge, Gov. Phil Bryant signed the First-time Homebuyer Savings Accounts, a new tax-advantaged savings program, earlier this year.
“First-time Homebuyer Savings Accounts are a great opportunity to put more of our citizens on the path to homeownership, while also creating economic growth,” Bryant said in a written statement. “We want shipbuilders in Pascagoula, Nissan workers in Canton, FedEx employees in Southaven, and all of our hard-working Mississippians to live the American dream. I can’t think of any better place for that to become a reality than in the Magnolia state. With these First-time Homebuyer Savings Accounts, the American dream is within reach for more Mississippians.”
Different versions of the bill were introduced in the Legislature throughout the last two years, Mississippi Realtors President David Griffith said.
“We researched how this bill would not only help first-time homebuyers but how it would help Mississippi as well,” Griffith said. “We made some revisions and worked with state leadership to bring the final bill to the table. This year, state leadership crafted a bill that passed with nearly unanimous support in both houses.”
The program allows individual Mississippians who have never owned or purchased a home to deduct up to $2,500 from their state adjusted gross income annually by establishing a designated First-time Homebuyer Savings Account. Couples are able to deduct up to $5,000.
There is no cap on how long or how much money an individual or couple can save. Interest earned on the deposits also grows free from state income tax.
Mississippians can begin taking the deductions in the 2018 tax year.
“The homebuyer savings account program will help more Mississippians invest in themselves, their communities and our state,” Griffith said. “It provides a new option to homeownership for many in our state to purchase their first home.”
Mississippi Realtors are working hard to raise public awareness about the program, Griffith said. In order to do that, the organization recently launched FirstHomeMS.org, a website where potential first-time homebuyers can go to learn more about the program, he said.
“Stakeholders from Mississippi Homebuilders Association, loan officers and representatives from several banks and credit unions joined about 100 Realtors for the website launch press conference earlier this month,” Griffith said. “The event was held during our semi-annual meetings, and our members left with information to take home to their local communities.”
Following the program website announcement, Griffith said the response from Mississippi Realtors’ financial partners at banks and credit unions has been overwhelmingly positive.
“Since it is a brand new program and the tax advantages don’t begin until 2018, we don’t have any data for the early participation rates by consumers,” he said. “Mississippi Realtors will work with our financial partners and the Mississippi Department of Revenue over the coming years to track consumer participation. (Despite the unknown data), the financial institutions are excited to create new deposit programs which will generate revenue, fund loans and establish relationships that could grow into mortgages.”
According to research commissioned by Mississippi Realtors, the program will enable nearly 7,600 new first-time buyers to enter the market over five years. In addition to neighborhood stability, new homeowners spend about $1,800 more in their communities annually than renters. And, as more buyers enter the market, about 379 new homes will be built to keep up with demand, the research by Lisa Sturtevant and Urban Analytics revealed.
“As Realtors, we know that saving for a down payment is often one of the largest hurdle for would-be homebuyers,” Griffith said.
Mississippi was the fourth state to enact a First-time Homebuyer Savings Account program, after Montana, Colorado and Virginia, Griffith said.
“There is a national appetite to increase homeownership,” he said. “Since Gov. Bryant signed the law, Iowa and Minnesota have signed similar legislation. Currently, there are 11 other states looking at the program. Mississippi is leading the way.”
First-time Homebuyer Savings Accounts can be created at any financial institution licensed to do business in Mississippi. Individual account holders are responsible for maintaining the funds in a separate account and reporting to the Department of Revenue.
The deposits can be used for a down payment and closing costs on a purchase of single-family home in Mississippi. Unqualified withdrawal and use of the funds is penalized 10 percent and taxed as gross income.
The goal of the Mississippi Realtors is to make the savings program a household name in Mississippi, Griffith said. FirstHomeMS.org provides a venue to connect consumers with financial institutions, property professionals and resources to help them on the path to homeownership.
“Our state leadership has given us a great opportunity. As Realtors, we have to champion the program in our communities. We have to engage our financial partners, homebuilders, media allies and other stakeholders,” Griffith said. “We’re all in this together. Together we can lead the state toward economic growth. And it all starts with homeownership.”