11 MayGet Your $8,000 Tax Credit Now!

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One of my customers contacted me to discuss methods to be able to use his $8,000 Federal Tax Credit for purchasing his first home in 2009.  I would like to share the details of our conversation with you so that it may assist you in the case you are a first time buyer looking to purchase in 2009.

What Tax Credit?

Hopefully by now, if you do not own your own home already, you are aware of the great tax credit that is being offered to first time home buyers who purchase between January 1, 2009 and December 1, 2009.  I originally posted information on January 7, 2009 about the original tax credit plan which offered $7,500 but had to be repaid.  It has since been modified to $8,000 and does not have to be repaid.  For details and frequently asked questions on this program check out FederalHousingTaxCredit.com.  This site was put together by the National Association of Home Builders and is the best site I have found for the details on the program, outside of talking directly with a CPA.

How Do I Get the Money Now?!

This was the question my customer wanted to know.  We discussed the options that were available to him, within the State of Colorado, to reduce his out of pocket expense for purchasing his first home.  Here is what we discussed:

• HUD $100 down program
• CHFA JumpStart
• CHFA HomeOpener
• Adjust Federal tax withholding

HUD $100 Down Program

Within the HUD website they have a listing of certain states that offer incentives to purchase HUD homes.  Colorado is one of the states listed on that list.  One of the best incentives HUD offers when purchasing a HUD home with FHA financing is the $100 Down Program.  This incentives provides home buyers (not just first time buyers) to purchase a home with as little as $100 down instead of the normal 3.5% down required with FHA financing.  If you are in one of the states listed on the HUD website and are looking to buy a HUD home, you should make sure your real estate agent and lender are aware of this program that could save you a lot of money you would otherwise have to pay at the time of closing.

CHFA JumpStart

CHFA, or Colorado Housing and Finance Authority, offers down payment assistance options to home buyers who do not own any other real estate.  The JumpStart program is one of those down payment assistance programs and is available only to first time home buyers.  The program was created to provide a resource for first time buyers to use the tax credit they will receive at the time of closing.  When you purchase CHFA will provide a second mortgage loan option for 3% of the first mortgage loan amount up to $6,000.  This will cover almost the entire down payment, depending upon the purchase price, leaving the buyer with the required $1,000 investment.  If your purchase price exceeds $200,000 you will be required to bring in more than $1,000 based on the maximum second mortgage amount being $6,000 while the minimum down payment required is 3.5%.  The second mortgage remains at 0% interest with no required payments through June 30, 2010.  In the case the second mortgage is not paid by that time, the rate will then go to 8% amortized over 10 years effective July 1, 2010.  CHFA’s hope is that you file your 2009 taxes, receive your credit pay off the second mortgage by June 30.

CHFA HomeOpener

CHFA’s HomeOpener program, unlike the JumpStart, does not require the buyer to be a first time buyer.  The only restriction related to home ownership is that they may not own any other real estate at the time of the home purchase.  There are other restrictions, such as purchase price and income limits, so check with CHFA for further details or contact me.  The HomeOpener work very similarly to the JumpStart in that CHFA provides a second mortgage for up to 3% of the first mortgage amount (this time with no cap of $6,000).  The interest rate on the second mortgage is the same as the rate on the first mortgage (also done by CHFA).  For current rates check out CHFA’s rates on their website, published for all lenders and buyers daily at 9:30 AM Mountain Time.  The second mortgage is amortized over 30 years, just like the first mortgage.  The minimum investment is the greater of $1,000 or the difference between the required down payment (3.5%) and the second mortgage (3% of first mortgage) provided by CHFA.

Adjust Federal Tax Withholding

If you know you will buy your first home and be eligible for the tax credit for your 2009 tax year, adjusting your federal tax withholding may be a good option.  If you know you will receive a refund why not reduce the amount of taxes you pay now to increase your net income each pay period to save for down payment now, instead of having o use one of CHFA’s options, limit yourself with the HUD $100 down program or receive a gift from a relative for down payment?  Adjust your withholding, with the help of a CPA, to allow for a higher net income and save for your down payment now.  Then adjust your withholding back or to something that makes sense for you after you have saved the necessary down payment or $8,000.  I suggest this from a mortgage loan officer point of view and not a CPA, so please consult with a CPA for assistance if you think this would be a good option for you.

I hope the details of our conversation will be as helpful to you as it was to my customer.  If you would like to discuss your options one on one, please talk with your lender and/or CPA.  Good luck!

Lending A Hand

Scott Wynn

About the Author | Scott & Marla Wynn

Scott & Marla Wynn are mortgage lenders with a focus on education. We believe an educated customer is our best customer. The mortgage industry has complicated the process of obtaining a mortgage so much that most customers believe the best way to select a mortgage lender is to inquire about rates and fees. Although rates and fees are an important part of the mortgage process, there are much more important areas to be concerned with. Lending A Hand was created to pass along our experience, knowledge and research to YOU to allow you to become a more educated mortgage customer. If you are planning a home purchase or refinance and live in the state of Colorado, we hope you select the Wynn Team as your mortgage lender!