You’ve probably heard about the first-time homebuyer tax credit, which is an attractive tax credit for first-time buyers, made available as a part of the American Recovery and Reinvestment Act. Under the program, a home must be purchased by a qualifying buyer before Dec. 1, 2009.
This generous tax credit doesn’t, however, provide for immediate help at the closing table—participants must wait until tax time to realize the substantial benefit. This is significant because one of the biggest obstacles to homeownership is the initial outlay of cash. Many Texans are more than capable of maintaining monthly mortgage payments, but down payment requirements and closing costs push a home out of their reach.
Early this July, the Texas Department of Housing and Community Affairs announced $7.5 million dollars in programs that enable qualifying Texans to “monetize” most of the federal first-time homebuyer tax credit.
Under the programs, the agency offers short-term loans, which can be used as down payment and/or closing costs. The intention is to bridge the gap between the date of purchase and the arrival of the buyer’s federal tax credit (a completed and processed 2009 tax return). The tax credit can be used to repay the loan.
TDHCA’s $2.5 million mortgage assistance program offers qualifying first-time homebuyers loans to a maximum of $6,000. Loans through this program are interest-free for the first 120 days.
The department’s $5 million, 90-day down payment assistance program offers qualifying first time homebuyers a loan up to a maximum of $7,000. Loans through DPAP are interest-free for the first 90 days.
Both programs are structured to give the borrower a simple way to access their federal income tax credit payment and use those funds to repay the loan. By repaying within the “interest free” period, the buyer’s down payment will not have to come out of pocket.
In both cases, funds are available on a first-come, first-served basis to qualified buyers. Homebuyers must also complete an approved pre-purchase homebuyer education course.
Fighting the good fight
In a July news release that supported the programs, TDHCA executive director Michael Gerber said, “Promoting homeownership is a key mission of the department, and these programs will help many Texans overcome two of the greatest obstacles to buying a home: coming up with the down payment and paying closing costs. Millions of Americans have experienced increased stability, security, and personal wealth as a result of owning their own home, and we are excited to extend this opportunity to even greater numbers of residents of this great state.”
The qualifications for the federal tax credit have not changed—if you’re single and your modified adjusted gross income (MAGI) is less than $75,000 per year, you may qualify for the full value of the tax credit. The credit for individuals begins phasing out at $75,001 and is unavailable to those whose MAGI exceeds $95,000 per year. Couples whose MAGI is less than $150,000 can take advantage of the full credit, with the phase-out beginning at $150,001 and ending at $170,000.
The TDHCA programs have slightly different income restrictions. Visit MyFirstTexasHome.com to verify eligibility, as well as find a Texas Realtor, a participating lender, and information on all of the agency’s first-time homebuyer programs.
A perfect storm
With all the available incentives from the federal government, it’s a good time to buy a home. And, given the recently announced TDHCA programs, that’s especially true here in Texas. In fact, in a May 2009 article for Kiplinger.com, owing to “conservative lending practices” and a “vibrant and diverse manufacturing sector”, personal finance writer Louis Jones calls Texas “the best place to own a home right now.”
There are numbers to support the assertion, as well: according to Kiplinger, of the nationwide metropolitan areas where 2008 median home values increased, five of the top 10 are in Texas:
1. Midland - +10.4%
5. Victoria - +6.2%
6.Bryan/College Station -+5.5%
9. Laredo - +4.7%
10. Lubbock +4.6%
Interestingly, in all of these markets, the median home values were still below the national average, in some cases, more than 35% lower. This means that property is affordable, but appreciating.
Now’s the time
For detailed information about how these program works, visit TexasRealEstate.com. and look for the Inside Texas Real Estate podcast with special guest, Michael Gerber, Executive Director of the Texas Department of Housing and Community Affairs.
For your real estate needs, contact RE/MAX Genesis at 830-833-2000.