The Virginia Housing Development Authority has rolled out a new program allowing qualified buyers to use their expected tax credit (max of $8,000) toward the down payment or closing costs when they purchase a new home.
The program is called VHDA FHA Tax Credit Plus. This potentially could mean no money down loan options for some. Buyers must meet all requirements for the VHDA FHA loans, including the income and sales price limits imposed on all VHDA loans, which means a household of 3 can not have income that exceeds $100,000; and the sales price of the home can not exceed $408,000.
The buyers must also qualify for the First Time Home Buyer tax credit which will be in the amount of 10% of the purchase price up to a maximum of $8000. A reduced tax credit is available to buyers whose income exceeds $75,000 (single filers) or $150,000 (joint filers).
The use of the tax credit will actually be done in the form of a 2nd trust. It will be payment, interest and penalty fee for the first 12 months. If not paid by that time, the trust will convert and be amortized over the remaining 29 years at the same interest rate as the primary trust; with no penalty. With this program, VHDA is actually making it optional to pay the second trust off or just starting making the 2nd mortgage payment. Please note the tax credit expires November 3oth, if you are thinking of buying, now is the time! For more information about how to take advantage of today's real estate market, please contact me.
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Special note: This is different from earlier guidance received. For practioners, please note that the funds MAY be used toward the down payment (not just closing costs as previously thought). This is because VHDA is a qualified non-profit, and is therefore exempt from the mortgagee letter that required maintaining the minimum investment of 3.5% on all FHA loans.