Texans can use the $8,000 Tax Credit as Down Payment

What First Time Home Buyers need to know about using the $8,000 Tax Credit; plus Using Owner Financing with the Tax Credit!
August 8, 2009
By: Donald Croucher Jr., Realtor'
Robert McNelis Co.


The government is offering first time home buyers an $8,000 tax credit in an effort to stimulate the ailing real estate market. Sellers can draw buyers by highlighting the refund in their ads, especially when used in conjunction with owner financing.

This appealing tax credit is part of the Recovery Act that was extended for 2009 home purchases. Here are 10 things you must know to make the most out of this program.

The Department of Housing and Urban Development (HUD) issued 2 methods by which the $8000.00 could be used at the time of closing.

1. The credit can be used towards additional down payment, beyond the required 3.5%, and closing costs on FHA insured loans. The process requires a lender or third party to put money in hand of the borrower in exchange for a promise of repayment when the borrower receives the tax refund. The refund must go to the borrower, the lender can charge a max of 2% ($160.00), and cannot put a lien on the property. The program has much risk and little reward for lenders, and I am not aware of any participating.

2. To help buyers that need down payment and closing cost assistance when purchasing a home with the tax credit, a number of states housing authorities are offering special short-term second loans to qualified buyers. These loans are available for little or no interest and may be repaid with the homebuyer tax credit refund.

Another option is to look into any local bond programs that provide down payment assistance. When Congress passed the $8000 version of the tax credit, they allowed purchasers to claim the credit even if they utilize state and local bond financing.

TATEWIDE SECOND LIEN REPAYABLE DOWN PAYMENT ASSISTANCE LOAN PROGRAMS
Texas 90‐Day Down Payment Assistance Program Mortgage Advantage Program
About the Programs
􀂃These programs are intended to allow the consumer to take advantage of recent legislation by receiving a short term loan prior o filing for and receiving the federal first time homebuyer tax credit.

Assistance
􀂃5% of the first lien mortgage amount up to a maximum of $7,000 for down payment and/or closing costs.

􀂃5% of the first lien mortgage amount up to a maximum of $6,000 for down payment and/or closing costs.

Requirements
􀂃Each homebuyer is required to complete a pre‐purchase homebuyer education course.
􀂃Homebuyers must be eligible to claim the federal first time homebuyer tax credit.
􀂃Homebuyers must complete IRS Form 5405 and file an amended 2008 IRS federal tax return.
􀂃Homebuyers must meet the First Time Homebuyer or Mortgage Credit (MCC) Program guidelines.

Availability
􀂃The funds are available only on qualifying purchases made by December 1, 2009 to eligible borrowers on a first come, first serve basis.
􀂃The program is available in conjunction with first lien mortgage loans originated by a participating lender.
􀂃The program is only available in conjunction with TDHCA's existing Texas First Time Homebuyer or Texas Mortgage Credit (MCC) Programs.

Repayment
􀂃The tax credit must be repaid to IRS if the borrower sells or moves from the home within three years.
􀂃As pay‐offs from the programs are received, TDHCA will recycle those funds back into the programs.
􀂃The 90‐Day DPAP offers 0% interest for 90 days
􀂃Failure to repay the down payment assistance loan in full within 90 days will result in monthly payments of principal and interest for two (2) years with an interest rate of 10%. Using this scenario, a homebuyer borrowing $7,000 would have a second lien note of approximately $323 per month.
􀂃The MAP offers 0% interest for 120 days.
􀂃Failure to repay the down payment assistance loan in full within 120 days will result in monthly payments of principal and interest for five (5) years with an interest rate of 7%. Using this scenario, a homebuyer borrowing the maximum of $6,000 would have a second lien note of approximately $119 per month.

Fees
􀂃A $250 administrative fee will be charged for both programs.

Eligibility
􀂃Homebuyers who have not owned a principal residence during the last three year period prior to the purchase.
􀂃The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return. 􀂃Applicable income limits for the Texas First Time Homebuyer or Texas Mortgage Credit Programs.

About the Tax Credit
􀂃The tax credit is equal to 10% of the home's purchase price up to a maximum of $8,000.
􀂃Tax refunds are generally processed within 8 to 12 weeks, giving the borrower sufficient time to repay the TDHCA down payment assistance loan and take advantage of early repayment incentives.
􀂃TDHCA recommends that every first time homebuyer consult with their tax advisor on how to maximize the benefits of this unique homebuyer assistance opportunity.


For More Information Contact:
Donald Croucher Jr., Realtor®
Robert McNelis Co.
Phone: 214-242-2412
Email: Info@RobertMcNelis.Net
Web: Www.RobertMcNelis.Net