$8000 Tax Credit used as Down Payment in Texas Coming Soon

This is a question I have noticed entered on searches for some incoming traffic here at My Denton County Real Estate, and have been asked about more than once. I have not addressed this yet due to the fact there is nothing in place YET. But in an effort to appease those search efforts, and to win over those future home buyers who have not yet chosen a real estate agent.

Here it is..

In early to mid May of 2009 the Texas Department of Housing and Community Affairs is going to unveil a program that will allow First Time Homebuyers to monetize the $8000 Tax Credit that purchasers between March 28th and December 1, 2009 are entitled to receive. This will enable those first timers seeking down payment assistance to put a credit they have not yet received towards the purchase of the home. Unfortunately no other information is available at the time of writing this entry. Their website simply says:

TDHCA is designing a down-payment assistance program for recipients of the federal homebuyer tax credit.

The Ft Worth Star-Telegram also reported on this March 22, 2009, it went on to outline how the TDHCA¹ suspended their existing first-time homebuyer finance program because it could no longer offer competitive interest rates compared with FHA.

So to be somewhat proactive on this topic, I decided to see how other states who already have a program in place are tackling this task.

• I have heard about tax preparers extending this credit, for a fee and with interest. I think that is a terrible and risky option.

• I also know that National Association of Home Builders is endorsing for members, such as Centex to run promotions for advancing the tax credit. Again, I think a bad idea, because most builders already have so much wiggle room, I don’t think they are doing any real favors for home buyers by not having equity in what most cases will be a starter home neighborhood.

To see an example of what seems to be the best program out there for using the tax credit for down payment assistance we only need to look North-East of North Dallas, the “Show Me State“ Missouri.

The Missouri state funded program works by:

1. Loaning the homebuyer up to 6% of the home purchase price
2. Which is then used for down payment and closing costs.
3. The homebuyer then files for the federal tax credit and uses the credit refund to pay off the loan from the state.

Now as I always tend to do here…time for my critique. If officials and pundits did not spend so much time complaining and bashing the stimulus package, something like this should have been put into place everywhere much sooner. Indiana, Kentucky, Michigan, New York, Oregon, Tennessee, and Washington are all now trying to implement similar programs to Missouri’s. It’s hard to come up with a better way to stimulate the financial market, and consumer confidence and spending than by enabling home ownership. By using the Stimulus Package in this way, we avoid the analogy…

cart before the horse

This type of program would benefit both home builders, and those who list their property on the MLS² by allowing first-time homebuyers to purchase either a new construction home, or those on the resale market. Since this is not 100% Financing type of plan, and in essence forces the purchaser to still buy some equity in their home by putting down the 3.5% required with FHA Financing.

I would expect in May when such a program is adopted here in Texas it will require the home meet the same standards and guidelines as FHA financing and appraisal, which may not help as many of those foreclosures, and short-sales that are saturating the certain markets. But it is great for clients who have taken pride in ownership and now just want to sell their house fast! If a Texas program is similar a 6% low interest or even no interest loan would also allow purchasers to pay most their closing cost, since typically a buyers closing cost are around 3% – 3.5% of the purchase price when the seller is paying for the title policy. Again, another great and responsible thing to do, more equity in your new home, since buyers may not have to roll-in the closing cost into the mortgage.

The Summer selling season for real estate looks promising, but don’t wait to get your financing in order or your REALTOR® chosen until May, because if the summer is going to be as busy as I believe, prices may actually start creeping up by July. As always, feel free to contact me by email or phone or commenting here with any questions, comments or concerns. And always choose a real estate agent, and mortgage broker that are knowledgable on the industry and the market in which you want to buy or sell.

1. Texas Department of Housing and Community Affairs [↩]
2. Multiple Listing Service [↩]

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1. $8000 First Time Home Buyer Tax Credit Now it is my tun to break down the $8000 First Time Home Buyer Tax Credit. I must admit, when the bill was being negotiated in the Senate, before moving...
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4. Monetizing the Tax Credit for a Down Payment: Clear as Mud Ever since the May 12th announcement from HUD1 that the $8000 First Time Homebuyer Tax Credit was going to be able to be used as a down payment I believe...

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