Tax credit available for certain homebuyers
by March 27, 2012 9:48 pm 131 views
At least 20 lenders across Arkansas have a new arrow in their quiver helping them hunt for first- time homebuyers.
The mortgage credit certificate program provided by the Arkansas Development Finance Authority provides a federal tax credit up to $2,000 per year as long the home is used as the principal residence.
Murray Harding, ADFA spokesman, said there is a pool for roughly $10 million to fund the credit through most of this year. He said a fair number of buyers are applying for the credit. He said plans are already underway to expand the funding for multiple years.
The qualifying requirements include: first-time homebuyer, purchase price $225,000 or less and the buyers would need to meet income criteria.
Harding said the mortgage credit certificate is not part of the financing package to purchase a home, but an incentive for a first-time homebuyer to purchase a home.
He said when prospective homebuyers are securing their mortgage financing with a list of participating lenders, they can also complete the necessary paperwork to secure the tax credit.
The only caveat Harding said, was first-time buyers can’t take advantage of the ADFA tax credit program and also participate in the mortgage revenue bond program that provides low interest rate loans fixed for 30-years.
He said the downpayment assistance programs can be used in conjunction with the tax credit program.
“We expect this new program used in concert with downpayment assistance will help more folks realize the dream of homeownership,” Harding said.
The ADFA calculates a $150,000 mortgage at 5% will result in $1,875 per year in tax credits, which a monthly savings of $156.25.
The maximum credit is $2,000 per year and any unused credit may be carried over for the three years.
There is a possible recapture provision is the borrower sells the house within the first nine years.,
“We estimate that about 96% of borrowers will not be subject to recapture tax,” Harding said.