90-DAY DOWN PAYMENT ASSISTANCE PROGRAM
TEXAS DEPT. OF HOUSING & COMMUNITY AFFAIRS
PURPOSE: To allow the consumer to take advantage of recent legislation by receiving a short term loan prior to filing for and receiving the federal first time homebuyer tax credit.
KEY POINTS:
1. 5% of the first lien mortgage amount up to a maximum of $7,000 for down payment and/or closing costs. Must be used with FHA financing. Primary residence only.
2. Must be first time homebuyer (has not owned a home in the last 3 years). The state will validate this with signed tax returns from the last 3 years. If an extension was filed on the most recent return, the buyers will not be eligible for this program through the state for down payment assistance funds.
3. Each homebuyer must complete a pre-purchase homebuyer education course. The buyer can go to www.mgic.com and sign up for a FREE online buyer's education course.
4. Funds are limited and available only for qualified purchases made by December 1, 2009 to eligible buyers on a first come, first serve basis.
5. Repayment: The 90-Day Down Payment Assistance Program offers 0% interest for 90 days. Failure to repay the down payment assistance loan in full within 90 days will result in monthly payments of principal and interest for 2 years with an interest rate of 10%. Under this scenario, a homebuyer borrowing approximately $7,000 would have a 2nd lien note of approximately $323/month.
6. Immediately after closing, the buyer can file a 2008 amended return-IRS form 1040X and form 5405. The IRS will then send the buyer a refund check for $8000 as part of the Federal First Time Homebuyer Tax Credit. The buyer can use this money to payoff the $7000 lien from the State of Texas. Remember, the federal tax credit is 10% of the price of the house up to $8000. Refunds are generally processed within 8 to 12 weeks coinciding with the 90-day 0% interest loan.
7. Buyers must qualify with the $323/month payment included in their debt.
8. Buyers must occupy the property for 3 years or the IRS will recapture the assistance in the tax year the property is sold.
9. Consider a 45-60 day transaction from start to finish. The file must be first underwritten by the lender for approval. Then, a package is sent to the state that is estimated to take up to 20 more days for finalization. Rush transactions are not for this program.
10. $250 cashiers check is required from the buyers own funds payable to TDHCA.
11. Income Limit: Single Taxpayer: $75,000; Married Taxpayers filing a joint return: $150,000.
12. It is critical to have the sales price and loan amount correct the first time. Any changes will start the process over as the new price/loan amount would need to be re-underwritten by the lender again prior to the file going to the state of Texas
13. In the Special Provisions section of the contract, disclose the following: "Subject to availability and approval of the TDCHA 90-Day Assistance Program use of funds".
Call Mike Banes at The Mortgage Gallery
972-393-0900
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