What’s an IDA? IDA stands for the Individual Development Account and is an excellent way for first time buyers to save up funds to buy a home. IDA funds can be used for a down payment and closing costs but are also available to save for college or trade school or even to start a business however saving for a first home is one of the most popular options. How does an IDA work? The money you save on your own is matched by a third party and can be anywhere from one to four times the amount of your own funds you put back. For example, if you work with a source that matches your deposit 3:1 and you deposit $75 in your account, the program will add another $225, or three times your deposit, until you either reach your goal or hit the matching limit for the program. Most programs limit the total amount saved from $4,000 to $6,000 depending upon the program. In all, there are more than 250 IDA sources across the country.
Imagine that for a moment. Not even the most generous 401(k) employer matching program comes close to these matching amounts and if you’re wanting to save money to buy and house and need some funds for a down payment and closing costs, there’s not faster way to come up with up to $6,000 other than having a family member giving it to you in the form of a gift. As you might expect, there are several guidelines future home buyers must follow and there are specific requirements.
Each and every IDA will be a bit different but most require your gross annual income be within 200% of the Federal Poverty Level and you have earned income from a qualified source such as your job, full or part time, and even supplemental social security income and MediCal payments.
Future home buyers must also attend and complete an approved financial literacy program that covers important topics such as developing a regular savings history, credit and how credit is built, debt reduction as well as investing and other money-related topics. This program is offered at no charge for those who qualify. This is a little known program but for those who do qualify it’s a real benefit that helps those who want to save funds to buy and finance a home secure those needed funds faster.
Questions or concerns? Click below to chat with a home loan expert now!