Are First Time Home Buyer Mortgage Programs Ending Soon?
For first time home buyers in New Jersey and many other states, the first time home buyer tax credit not only gave some incentive to purchase a home, but it also gave them the availability to purchase homes they otherwise could not have qualified for. Let me explain.
Most states, if not all, have first time home buyer mortgage financing programs. In New Jersey, we have the New Jersey Housing and Mortgage Finance Agency (NJHMFA) that offers first time buyer grants, first time buyer mortgages, and a handful of other great options. In Pennsylvania, there is PHFA.
Many of these finance agencies made available a way to utilize the federal first time home buyer tax credit to buy a home. I'm not talking about settling on a home and getting the tax credit sooner through a revision of 2009 tax returns. I'm talking truly using the federal tax credit money for a down payment and/or closing costs. In New Jersey this is known as the Tax Credit Loan Program, or The "Prefund" Program.
There are several benefits to this program that make it a great option.
- The interest rate on this program is lower than a first time home buyer program that has a grant program tied to it (Such as the Smart Start program offered by the same agency).
- The Tax Prefund Program is not restricted to certain geographical areas like some other first time home buyer programs are.
- Because the interest rate is lower, it allows borrowers to qualify in situations were approval is marginal. The difference in rate from one program versus the other could be as high as .75%. This changes a buyer's debt ratio and can allow for an approval when a buyer's profile is not perfect.
For some first time buyers who's price range is near the lower end of the market, these seemingly small differences make a huge difference to their buying power and loan approval. In 3 of the 4 transactions I personally have originated using this program, these differences were enough to allow for approval. That's three extra buyers this market may otherwise have not seen! That is GREAT news for them!!
Some first time home buyers who wait will be losing a lot more than just $8,000 when the tax credit expires; They will be losing their current oppurtunity to purchase a home.
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Love the pictures, especially the word balloon on the turtle picture!
Sharon - Thanks! :)
Steve... overall, the tax credit itself has been around for almost 2 years. How long must we dangle that carrot, besides the fact that it will cost us all down the road. I do like it, but for how long? Yes, NJ has a good program for this, but from my research, less than 50% of all states allowed this type of financing to get to the tax credit at closing. Just food for thought. And the reason I bring this up... if the gov't was serious about this, they could have gotten the main agencies to allow this type of monies, just as FHA allows 100% gift monies from relatives. My problem, we threw common sense out the window and it's now time to let the market correct itself. With too much gov't intervention, it will make it worse down the road. There have been signs of this. thanks
Steve... question and food for thought.... under the programs that you mentioned, that allowed you the money upfront, from NJ, could it be used as your full down payment, of 3.5%? thanks
Jeff - The program through NJHMFA that Steve is referring to allows a borrow to receive up to $5,000 of the $8,000 tax credit at the time of closing. Yes, this can be used towards down payment.
Karl - Thanks for the response - I forgot to reply! I had to take a nap after reading Jeff's previous comment. j/k Jeff. The $5k is used for down payment and/or closing costs. So depending on purchase price, the $5k plus concessions can handle it all.
Thanks Karl...
Steve, yes, my comments tend to be mini blogs... but thanks for answering the question. Did you fall alseep in my most current blog? lol
No - it was good, although I may have more questions now than before :) I don't know how "easy" we can get out of the tax credit when it does indeed come to an end. If nothing else, it should be interesting!
Steve - Do you know the state's current turnaround time on approving these loans?
I love your new profile pic. You look so young
Karl - I closed one yesterday and have one next Tuesday - its been 4-5 days for review at the state level. But I can see it getting really busy as we get closer to Dec.1 so any such loans will want to get there and ideally have at least a week for review. Two weeks I'd feel safer, but we certainly don't always get what we like.