Saving for Your Dream Home: The Benefits of a First-Time Homebuyer Savings Account

Buying your first home is a big step, and it's important to be financially prepared for the journey ahead, especially given the recent increase in the cost of buying a home. One of the most helpful tools to help you save is a first-time homebuyer savings account. This type of account is currently offered in 12 states and offers incredible benefits that make it easier for you to save money and buy your dream home faster. Here are the top 5 benefits of a first-time homebuyer savings account:

Tax Savings

You can deduct your contributions to the account from your state income taxes. Plus, any interest earned on the account is tax-free as long as you use the money for a home purchase. This means big savings over time, especially if you contribute regularly. For example, if a couple decides to contribute $5,000 each to this savings account over the course of the year, assuming a state tax rate of 5%, they would be able to reduce their taxable income by $10,000, resulting in a tax savings of $500 ($10,000 x 5%) annually. The interest earned on the account may also tax deductible! If you're already saving for homeownership, it may make sense to take advantage of additional tax benefits through an FHSA.

Competitive Interest Rates

First-time homebuyer savings accounts often offer higher interest rates than traditional checking and savings accounts. This means that your money can grow faster, helping you reach your savings goals more quickly. Foyer offers a 4% yield on its flagship homebuying account, so you can be confident your money is being put to work especially in a difficult financial environment.

Flexibility

First-time homebuyer savings accounts are designed to be flexible, allowing you to contribute as much or as little as you can afford each month. Some accounts may have a minimum balance requirement or annual contribution limit, but these are typically low and can be adjusted to fit your needs. This can be especially helpful if you're on a tight budget or have other financial goals you're trying to meet at the same time. By contributing what you can, when you can, you'll be making progress toward your homeownership goals without putting undue stress on your finances. 

In addition, unlike other goals based savings accounts like a 401k or IRA, there are no penalties for withdrawing your funds "early". Foyer will never charge fees if you need to withdraw funds from your homebuying account if a sudden need arises or your home goals change. While tax benefits and rewards may not be realized, FHSAs are designed to be as flexible as you need to be.

Certainty

Stock markets are volatile year over year, and studies show that there could be a 22% probability of loss for investments with less than a 5 year time horizon. As such, if you are planning to buy a home in the next five years, it is often recommended to save your down payment funds in a low-risk investment vehicle like a high-yield, first-time homebuyer savings account which will protect you against market downturns. With Foyer's home savings platform, you are also also insured up to $250,000 so you can know your savings are growing consistently towards your home goals without chance of loss.

Specific homebuying benefits and tools

ds are used for your down payment of home closing costs. Combining this match with your tax savings and yield can significantly boost your home buying power. Foyer also provides educational tools which help you understand how much you can afford and helps you connect with vetted agents and mortgage companies when you're ready to take the next steps in your homebuying journey!

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How do I get started?

Depending on your state, to open a first-time homebuyer savings account, you typically need to be a first-time homebuyer or have not owned a home in the last three years. This means that even if you've owned a home before, you may still be eligible for this type of account if it's been more than three years since you owned a home. These specialized accounts are relatively new and unheard of, yet extremely effective tool for anyone looking to save to buy their first home. With tax advantages, higher interest rates yields, no withdrawal penalties, and Foyer’s savings match, this type of account is a no-brainer for every aspiring homeowner. Click here to join Foyer’s waitlist as we prepare to launch our savings account product in the summer of 2023!

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