CHFA ................ Federal Recapture Tax

By
Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut NMLS #65149

As I stated in my previous blog, last week I posted a blog updating some of the changes to Connecticut Housing Finance Authority (CHFA) since my previous post. This post covered most of the requirements for CHFA Loans as well as additional programs that they have. The danger, as I stated before, of writing a post like this is that it covers so much, that it is very easy to miss some very important points that most do not know, or have a misconception about. The reason why I included so much in that blog is because I wanted a blog that a Borrower could go to, and read all about CHFA in one place without having to search around and jump from one screen to another.

The first CHFA feature that I tried to clarify was the misunderstandings that CHFA is JUST for First Time Homebuyers.  In this post I want to clear up misinformation about the "Federal Recapture Tax" feature of CHFA Mortgages, that some Brokers and Loan Officers that are not able to do CHFA Loans make.

Brokers and Loan Officers that are not able to do CHFA Loans, often try to scare Borrowers by telling them that they do a CHFA Mortgage, that they will have to pay a "Federal Recapture Tax" when they sell the property.  It is unfortunate that they do this, but it happens all the time, and nothing could be further from the truth.  McCue Mortgage is one of if not the largest CHFA Lender in Connecticut today, and we cannot remember the last time that a CHFA Borrower had to pay a "Federal Recapture Tax" on a CHFA Loan, and this is the reason why.

Under certain circumstances, CHFA mortgage loans may be subject to Federal Recapture Tax. The payment of federal recapture tax occurs at the time the property is sold, only if ALL three of the following conditions apply, not one or two, but ALL three:

  1. The house is sold or disposed of within nine (9) years of being purchased, for reasons other than death.
  2. There is a capital gain on the sale of the home.
  3. The household income exceeds Federal Recapture Tax limits at the time of the sale.

If homeowner’s income has reached the point that it exceeds the Federal Recapture Tax Limits (and these limits go up for each of the first 9 years of the loan), they would probably be only too happy pay the tax in exchange for that income. And even then the other two conditions MUST also apply in order for this tax to be paid.

So if a Broker of Loan Officer trys to tell you not to do a CHFA Mortgage because you will be penalized when you go to sell your house within the first 9 years, point them to this blog and see what they say.

I hope this clarifications proves to be useful to those reading it, and if you have any further questions please contact me and I will be happy answer them.

 

************************************************************************************************

Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

 

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Topic:
ActiveRain Community
Location:
Connecticut Middlesex County Middletown
Groups:
Realtors®
Mortgages
1st Time Buyers
Connecticut Club
Real Estate Rookie
Tags:
chfa

Spam prevention
Show All Comments
Rainmaker
978,605
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Interesting George...I am not familiar with a CHFA loan. I do know that it is terrible that another mortgage broker spreads misinformation.

Mar 03, 2009 11:54 AM #1
Ambassador
2,883,184
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut - Middletown, CT
Your Connecticut Mortgage Expert

Bill they try to scare buyers because they cannot compete with the CHFA interest rate.  It is a 30 fixed rate and it is mormally a half to a full point off of the FHA interest rate.

Mar 03, 2009 12:32 PM #2
Rainmaker
815,023
Ann Hayden
Berkshire Hathaway HomeServices Select Properties-St. Louis Missouri - Chesterfield, MO
SelectAnn.com

George,

Excellent info.  Buyers should always try to find someone who knows the score or at least a reliable source for the info like you...

Ann Hayden smiling in spite of it all in Wildwood, Missouri

Mar 03, 2009 12:49 PM #3
Rainmaker
1,302,097
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

George -- It is important to have posts like this that clarify the benefits of the CHFA loans.  We have a similar program in New Hampshire -- NHHFA -- I have been in touch with them to confirm that the new tax credit can be used along with their program --[ the original $7500 credit could not].

Mar 03, 2009 12:51 PM #4
Ambassador
2,883,184
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut - Middletown, CT
Your Connecticut Mortgage Expert

Ann thank you.

Joan the first Tax Credit for $7,500 was not available for loans funded with tax exempt bonds, but the new tax credit for $8,000 is available for loans funded with tax exempt bonds.  That was one of the major changes to this tax credit, the other was that unlike the first one it does not have to be paid back.

Mar 03, 2009 01:42 PM #5
Rainmaker
978,605
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Wow 1/2 is a pretty big difference! I can see why this program would be attractive.

Mar 05, 2009 08:37 AM #6
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Ambassador
2,883,184

George Souto

Your Connecticut Mortgage Expert
Call Me With All Mortgage Questions
*
*
*
*
Spam prevention