A while back HUD announced that FHA will allow state housing finance arms to provide second mortgage so you can use the 'anticipated' $8,000 tax credit towards your downpayment and closing costs to buy homes with FHA-insured loans. (h/t NAHB)
The big question is "how do you do it?" Yup- that is how. Last weekend I was out with a client. We talked about this tax credit thing. (This client used to work for IRS). She says that "she is familiar about how tax credit works however, she found out that none of the lenders she talked to, know how to do it. If such thing is available, she would like to apply for one."
The thing with tax credit is, you have to file your income tax first before you can get the credit. So, if we're talking about the deadline for the credit, closing by November 30, 2009 - you have a problem here. Because technically, you can't access the credit before you file your taxes. See how it's complicate things a bit..
Don't worry now. We've got the the answer to this "how" can you access the credit for downpayment and closing. It is done through state housing agencies. According to NCSHA (Natl. Council Housing Agencies), a number of state housing agencies offer this kind of program: Colorado, Delaware, Idaho, Kentucky, Missouri, Nebraska, New Jersey, New Mexico, Ohio, Pennsylvania, Texas, Tennesse and Virginia. (if it's not listed here, there's no such thing available in your state).
It's just because I do biz in Virginia, will talk about VHDA program. This is how the program works, via VHDA:
- Eligibility:
Borrowers must meet federal First-time Homebuyer Tax Credit
requirements as well as VHDA's requirements regarding first-time buyer
status, income limits, sales price, etc.
- Maximum income: The combined income of all household members may not exceed VHDA's maximum income limit. For example, Wash DC MSA, 2 or fewer can't make more than $86,900. (more about max. income limit, here)
- Maximum sales price: On the 2 or fewer max. income above, the maximum sales price is $408,100.
- Max. sales price/ total loan amount: The combination of 1st and 2nd loans cannot exceed VHDA sales/ income limits.
- Minimum credit score: 620.
- Qualifying ratios: FHA ratios of 31% payment-to-income/ 43% debt-to-income apply.
- Required borrowers funds: Must have a minimum of 1% of the sales price "VERIFIED" as their own funds to be contributed towards the transaction or have it available as reserves.
- Pricing options: Pricing options are available (think this info is for lenders). Rate on first and second mortgage will be the same (this is good!). No points or origination fee charged on the second mortgage. - emphasis added
So the program is designed to fill the need of first-time buyers. Oh, not all FHA lenders work with this kind of program. Only VHDA approved lenders offer their products.
The catch: you have to take a "free" VHDA homeownership seminars. That's it. Here is where you find out about the classes..in Northern Virginia.
