Life Without Down Payment Assistance
Yesterday I talked about exploring the option of a lease-purchaes for my first home when there were no down payment or seller closing cost assistance programs. Those days may be returning - and more quickly than you think.
Assistance programs are coming to an end on October 1, 2008 thanks to the Housing and Economic Recovery Act of 2008 which was signed into law last week. Both lenders and Realtors are expecting a spike in home sales as house hunters rush to buy their homes while they can still get help with down payment assistance and seller-paid-closing programs.
Greg Goodman of Countrywide Home Loans recently wrote that some observers believe these programs exploit a loophole in federal housing lending laws by allowing nonprofit organizations to gift mortgage down payments.
In some ways, these gifts have become a substitute for subprime loans, in that they give builders a way to place first-tine and low-income buyers into homes even when they can’t afford a down payment.
All is not lost for buyers because there are other programs available. For example, the Tennessee Housing Development Agency still offers grants to buyers when they complete mortgage counseling coursework.
On the other side of the housing bill, the Feds are granting a $7500 tax credit this year. This seemingly juicy tax break comes with a price, though. According to AccountingSolver, the money has to be paid back,
The tax credit has to be repaid 2 years after the purchase. At the tax credit of $7500, the resulting average increase in your tax bill for 15 years will be $500.
I voice my agreement with Miranda at Mortgage News,
Um, wow. Maybe first-time homebuyers would be advised to avoid the tax credit after all, and just focus on the interest rate and property tax benefits that are already offered.
Sometimes you should look a gift horse in the mouth.
The message here is if you’re on the fence about buying and you are already approved for a down payment assistance and / or seller assisted closing cost program, then you need to move now to make it happen. If you delay too long, you may not be able to purchase after October 1st without having your own money saved - and you’ll need from $7000 upwards depending on the price of your home.
