First-time Home Buyers Assistance Program with TDHCA

Earlier this week I posted about becoming a Affordable Housing Specialist, as promised I am following up with more detailed information about the programs. It was my intent to be able to roll all of them into just 1 post after removing some of the fluff. But once I began writing I found that was not going to be possible and keep this down to a manageable size. So I am going to continue this series with Texas Department of Housing and Community Affairs.

Texas Department of Housing and Community Affairs or (TDHCA) Acts as a pipeline for federal grant funds for housing and fund other city, county and community services. Programs are designed primarily for low to moderate income families and include:

• Texas First Time Home-Buyer Programs
• Mortgage Credit Certificate Programs
• Texas Home Buyer Education Programs

Texas First Time Home Buyer Program

With this program all of the funds are available through a network of participating lenders on a first-come first-serve basis. There are set  allowable fees the program allows these lenders to charge, and a $75 fee by the program for a compliance review. All loans are sold to and serviced by Countrywide Bank.

In Denton County, and other non-targeted areas in order to qualify for the Texas First-Time Home Buyer Program borrowers:

• May not have owned a home as their primary residence in the last 3 years.
• Must be purchasing as your primary residence.
• The buyer(s) current income must not exceed program limits.
• The purchase price, not the mortgage amount – of the home must not exceed the program limits. In Denton, Tarrant, Dallas, and Collin County the maximum purchase price at this time is $237,031.

If the purchasers are in compliance they can receive:

• A low 30-year fixed-interest rate mortgage. At the time of this posting Unassisted was 5.75%, and Assisted at 6.5%.
• Grant funds for up to 5% of the mortgage amount for down-payment and/or closing cost assistance for income eligible borrowers.

In targeted areas, which are areas the TDHCA and/or HUD have deemed in need of revitalization, the 3 year limit since owning a homesteaded property is waived and the buyers income and purchase price limits are can be higher. Thankfully, in some regards, no areas of Denton County, Tarrant County, or Collin County fall into this class.

Eligible Property Types:

• Single Family Residential Properties
• Condominiums
• Townhomes
• FHA Standards Approved Manufactured Homes

Here is the process I believe a first time home buyer should take who may or may not participate in this or any of the assistance programs available.

1. Contact Me to learn which of any of the programs may be best for them.
2. Let me refer you to a participating lender I have worked with and am confident with their competence.
3. The Lender qualifies the borrower using the program compliance guidelines.
4. The loan is underwritten by the lender using the eligible loan product guidelines (i.e. FHA, VA, USDA, or Conventional)
5. NOW the buyer can and should start looking for homes to purchase.
6. The lender registers the loan with the master service provider – Countrywide Bank.
7. The loan must be closed with 180 days on new construction; 60 Days for existing homes.
8. All loans are delivered and serviced by Countrywide Bank.

Now for the downfalls of this program – The funds are only disbursed to the lenders 2 -3 times a year. The  available funds dry up quickly and are often not available when you would like them to be. There is also a possibility of a Recapture tax.

A Recapture Tax is to enable the federal government to collect or recapture the subsidy received by the borrower in the below-market interest rates and down payment assistance that was financed with a tax exempt mortgage revenue bond – that funds these type of programs.

If you:

1. Sell your home within nine years;
2. Earn significantly more income than when you bought the home; and
3. Gain or profit from the sale of the home, you may besubject to recapture tax.

All three of these criteria must be met. In reality, most borrowers will not have to pay any recapture tax. For others, the amount will be minimal. The tax will never exceed one-half of the gain on the sale of the home or 6.25 percent of original mortgage, whichever is less. It is suggested that potential buyers contact a tax advisor or the Internal Revenue Service for more information concerning the possibility of the payment of a Recapture Tax.¹

Mortgage Credit Certificate Program

A Mortgage Credit Certificate or MCC is a federal income tax credit designed to assist persons better afford individual home ownership. It allows the home buyer to claim a tax credit for some portion of the mortgage interest paid per year, not to exceed $2,000 during each year the borrower occupies the home as a principle residence. The credit can be claimed for the life of the loan, and simply files an IRS Form 8396 with their annual tax return to claim it. Also, if a borrower chooses they may adjust their W-4 to reflect the tax credit, which then can help the buyer qualify for mortgage. It CAN NOT be used with any subsidies that were from a tam exempt fund.

The program is open to those individuals and families who:

• Meet the income and home purchase requirements;
• Have not owned a home as primary residence in the past three (3) years;
• Meet the qualifying requirements of the mortgage loan;
• Will use the home as their principal/primary residence.

The MCC should be applied for at the same time the borrower makes a formal application for the mortgage loan, and these certificates are also only available on a first-come, first served basis.

Tax Credit vs. Tax Deduction

A Tax Credit entitles taxpayers to subtract the amount of the credit from their total federal income tax liability, receiving a dollar for dollar savings.

A Tax Deduction is subtracted from the adjusted gross income before federal income taxes are computed. In other words, with a deduction, only a percentage of the amount deducted is a realized savings.

Texas Home Buyer Education Programs

The specific program from TDHCA I will point out is designed to teach the principles and application of pre-purchase and post-post purchase home buyer(s) education. Which in all honesty, if similar classes were available or required nationally  before ever buying a home, the countries housing market may not be in the position it has been.  Classes like this one, counterparts are also offered through City and County programs, help borrowers spot predatory lending, and teach retention of your home. Too many first time home buyers trusted lenders that said they could afford a certain amount of house, only later to find they could make the payments, but might not be able to pay the taxes, property insurance, utilities, lawn care, and just normal wear-and-tear a house takes.

Furthermore, it is my opinion, which does not make me too popular with some agents. That too many agents do not even realize these issues, they were not being greedy necessarily, but just assumed a first time home buyer understood everything, or should trust a their customers lender. We all know what they say about those that assume…

OK, so this will wrap-up my little summation of the Texas Department of Housing and Community Affairs First Time Home buyers, and affordable buyers programs. This is by no means all there is to know, I just wanted to point at some key issues, and perhaps break down some misconceptions so other agents, and buyers may not be so afraid of such programs.

Let’s face it, when funds are available, and if you qualify, these programs are not just for buying little 2 bedroom 1 bath $80,000 home on the wrong side of the tracks. In the DFW metroplex you can get a 5 bedroom 3 bath home, under the $237K limit of this program.

TDHCA’s website is huge, and chalked full of information. It can get a little intimidating for anyone to even think about applying when they want to purchase a home. But, if you have a REALTOR® who understands, and works with partner lenders who are competent, Your closing should be flawless!

1. TDHCA Frequently Asked Questions [↩]

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