I’m concerned that more people aren’t speaking openly and often about the fact that the First Time Homebuyer Tax Credit – which is part of the part of the Housing and Economic Recovery Act of 200 – is really an interest free loan for a period of 15 years.
The law allows for a tax credit of up to $7,500 for qualified first-time buyers purchasing homes on or after April 9, 2008, and before July 1, 2009. However, the word “tax credit” seems to me to be a bit misleading – as I’ve always understood “credits” and “loans” to be two completely different things. Namely, you pay loans back, but are not required to pay back a credit.
The terminology used in today’s housing finance industry just baffles me. Take city, county, and municipal downpayment assistance programs. Many are quick to position these in apples to apples fashion as a saving grace to homebuyers should the programs offered by companies like Nehemiah and Ameridream terminate come October 1, 2008. But buyers should be warned now that such a comparison is not possible. The DPAs offered by the aforementioned organizations do not require repayment by the purchaser for monies received. This is not the case with many programs that will remain in place after October 1. Not only are these city, county, and municipal downpayment assistance programs difficult to obtain (miles of red tape to cut through and in most cases – they can take 30 to 45 days to reach the approval stage), they have to be repaid if you sell or otherwise move from the home!
Color me confused, but my understanding of the word “grant” equates to money you don’t have to repay. Sure, there may be a report or some sort of due diligence report may be required to ensure you used the money as you were supposed to, but you were not on the hook for a single red cent cash wise. I met with John Lamberg, Florida Area Manager for the Nehemiah Corporation yesterday. He relayed more than one account where Florida area Realtors were revving up their marketing efforts (yes, more postcards) to push the $7,500 Tax Credit to potential first-time homebuyers. However, many were stunned to realize that this “credit” really amounts to a 15 year, interest-free loan payable in 15 years. Pretty important thing to include on those marketing materials, don’t you think? Michelle Singletary recently posted a fantastic article addressing the payback issue pertaining to the new Tax Credit and hits on this very point. During a conversation she had with Sandy Dunn, President of the National Association of Homebuilders (NAHB), Singletary pointed this fact out as Dunn relayed her enthusiasm about the $7,500 tax credit program.
Sandy Dunn, president of the builders’ association, said that as millions of first-time buyers enter the market and claim the credit, it will “stimulate buying up the housing ladder.”
I did find the repayment information on the FAQ section of the NAHB’s Federal Housing Tax Credit website (special thanks to Mad Dave Woodson for the URL). Follow this link to go directly to questions 16. – 18. dealing specifically with the payback aspect of this “tax credit.” So it is out there, and kudos to the NAHB for making it clearly available in their FAQ section on this topic. However, it is still very important that if you are currently espousing the benefits of this “tax loan” program to potential fist-time homebuyers, you must make it crystal clear that just because your client qualifies for it, doesn’t automatically mean it’s a wise financial move. We’re still dealing with a loan here. Interest free or no, if a buyer accepts this tax credit, they’re taking on debt. It’s that simple.
Photo Credit: Cayusa’s flicker photostream
I hope you found this post useful! As always, if you or anyone you know is in need of a local Florida mortgage loan originator, I’m your guy. Call me at 888-859-7418 or apply online for your Florida mortgage. We’ll keep you posted and let you know when it’s time to pull the trigger!
No related posts.
The first time home buyer credit has now been extended until April 30th of next year. It isn’t December 1st anymore. That should give people a little more time to shop around and get financing. Also, the annual income limits have been increased to $125K for singles and $225K for couples.
Stacy
First Time Home Buyer Tax Credit
.-= Stacy@FirstTimeHomeBuyerCredit´s last blog ..Contact Us =-.