New Hampshire Housing’s Home Advantage Program Offers a Simple Solution and Source for Home Purchase Down Payment
The Federal Government passed the American Recovery and Reinvestment Act in 2009 which provided a federal income tax credit for first-time home buyers up to a maximum of $8,000. This benefit is available to home buyers who purchase a new or existing home before December 1, 2009.
A major barrier for most potential home buyers is the ability to save the money for a down payment. The best option for most buyers is FHA financing which requires a 3.5% down payment and can be gifted by a relative. Many home buyers do not have this source as an option and would like to “borrow” the tax credit to use at the closing.
The federal tax credit is received by qualified buyers when the file their tax return. They may also file an amended return for 2008 in order to receive the funds this year. Housing finance authorities in many states (NHHFA in New Hampshire) have created special programs to “monetize” the federal tax credit to provide assistance for funds at closing. Typically, these short-term loans only provide a portion of the federal tax credit and are expected to be paid in full when the borrower receives their tax credit check. If the loan is not paid in full, it automatically converts to a second mortgage with monthly principal and interest payments. If the borrower is obtaining an FHA mortgage the process is complicated by having to follow FHA guidelines.
New Hampshire Housing’s Home Advantage Program
One alternative available in New Hampshire to the complicated short-term loans is the Home Advantage Program. This program gives the home buyers the opportunity to “monetize” their federal tax credit with an interest free second mortgage of up to $10,000. There are no monthly payments, no interest, and the buyer may choose to pay off the loan without it converting to a second mortage. Eligibility and program guidelines can be found at Home Advantage Program or by contacting a participating lender.
August 3rd, 2009 - 2:24 pm
Autos 1, Housing 0
There is a pent up demand by consumers to spend in America. This is evidenced by the overwhelming success of the “cash for clunkers” program, it’s been so successful that Congress is allocating more. On the other hand, the $8000 First-Time Homebuyers Tax Credit has been a yawner, due to the fact that HUD has added additional regulations that were not the intent of the Stimulus Bill.
The “clunker” program has accomplished exactly what Congress intended, reduce inventories, help the manufacturers, stimulate the local economies and inject cash into the local and state revenue shortfalls. It is refreshing to see this success without any additional Federal regulations or roadblocks.
The $8000 Tax Credit as it stands, benefits only the wealthy, those home buyers who have a wealthy family member who will lend the $8000 so they can buy a home, be eligible for the credit and repay the loan. What about average Americans who are approved for a FHA mortgage, but don’t have wealthy families to lend the $8000, where do they get the 3.5% required downpayment from? So far the Tax Credit has not reduced inventories, has not helped the local economies and has not added to the local and state revenue shortfalls to any extent, as the Stimulus Bill intended. HUD allows only State Housing Finance Agencies (HFA’s) (there are only 11 states offering this) to lend the 3.5% FHA required down payment against the Tax Credit. The problem is that only 11 states offer any help and all of these states have limited funds for their programs. Where are the Realtors (NAR) and the Builders (NAHB) in this issue, are their members satisfied with the lack of monetization of the Tax Credit for the majority of potential home buyers, the missed opportunities, I would think not? The President also is missing opportunities by the under utilization of the Tax Program.
Congress has put forward numerous Bills with regard to the $8000 Tax Credit, Sen. Isakson (R-GA) proposes raising the Credit to $15,000 and Rep. Johnson (D-TX) has a Bill extending the Tax Credit, to name just two. Wouldn’t the average American First-Time Homebuyer be better served if Congress enacts legislation that will specifically authorize and require HUD to recognize that a Tax Credit is an asset? Furthermore that this asset is either eligible to secure a loan under FHA’s existing collateralized loan guidelines or be eligible for purchase by nonprofit agencies in order to monetize the Tax Credit and allow these funds to be used for the required 3.5% down payment. It should be noted that these nonprofits are not parties to the real estate transaction and do not benefit from the transaction.
August 13th, 2009 - 10:09 pm
Tim – Check with your states housing authority. They may have a program to monetize the $8000 for use at closing. USDA offers 100% financing for qualified buyers in communities with populations under 20,000.
October 11th, 2009 - 1:21 am
That was a thought-provoking post if ever I have seen one. I can’t say that I completely agree with you about the first time buyer tax credit though, could you clarify your thoughts on that?