On May 29, the U.S. Department of Housing and Urban Development (HUD) announced that first-time homebuyers may now use the $8,000 federal tax credit for down payment and closing costs. Borrowers receiving an advance loan through an FHA-approved lender must use a governmental program such as MHDC’s Tax Credit Advance Loan (TCAL) program or the buyer will still have to contribute 3.5% of his/her own money toward the down payment. Borrowers who use programs such as TCAL are allowed to finance their entire down payment and closing costs.
MHDC was the first in the nation to roll out such a program. The Tax Credit Advance Loan (TCAL) is issued through second mortgage to the homebuyer at the time of closing, worth up to 6% of the home purchase price or a maximum of $6,750, which is used to cover down payment and closing costs. Because this loan is intended to be used for the down payment and closing costs, the buyer does not need to have the FHA-required 3.5% down payment separate from this loan.
The TCAL is paired with MHDC financing for the first mortgage in the form of a safe, 30-year, fixed-rate mortgage. The homebuyer then files for the federal tax credit and uses the credit refund to pay off the MHDC Tax Credit Advance Loan. If the TCAL is paid off by the designated deadline, the homeowner pays no interest other than a modest servicing fee. If the TCAL is not paid by the deadline, principal and interest payments to repay the loan over 10 years begin automatically.
A second, newer program being offered by MHDC is the Neighborhood Stabilization Down Payment Assistance program. Missouri received $42.66 million from the U.S. Department of Housing and Urban Development (HUD) Community Development Block Grant Program under the Housing and Economic Recovery Act of 2008. The funds are intended to be used to buy foreclosed properties, with the goal of stabilizing neighborhoods in areas hit particularly hard in the foreclosure crisis. MHDC received $4.2 million of these funds to be used for a down payment assistance program for qualified homebuyers purchasing foreclosed property.
Through the MHDC program, qualified borrowers are eligible to receive up to 20% of the purchase price of the home, capped at $14,999. The NSP funds are delivered in the form of a second mortgage with an interest rate of 0%, which is forgiven after five years. The NSP loan is paired with MHDC financing for the first mortgage, which is a safe, 30-year, fixed-rate mortgage. Borrowers must have incomes at no more than 120% of the area median income of the county in which the property is located, receive eight hours of homeownership counseling and the home purchase price must be discounted at least 5% from the current appraised value. The current market appraised value must be established by an appraisal completed within 60 days of the offer being made for the property.
First-time homebuyers using NSP funds are also eligible to receive the $8,000 federal tax credit for first-time homebuyers if the home is purchased prior to December 1, 2009. First-time homebuyers claim the tax credit on their federal income tax return.
For more information on these MHDC homeownership programs, please go here.
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