May 13, 2009

A revolutionary program that give home buyers easier access to money.

The Memphis Area Home Builders Association is launching a program that will allow first-time homebuyers to borrow their down payments and repay it from their $8,000 federal tax credits.“This means Memphis Area Home Builders Association (members) can sell homes by loaning people their down payment so they can get in basically for no money down,” said Hodgkins, owner of Oaktree Homes LLC. “But that (loan) is to be repaid by the assignment of their tax credit.”

The program is the first of its kind in the nation and could jumpstart the county’s sagging new home sales by giving potential homebuyers access to money at closing instead of making them wait for their amended tax returns, which can take weeks or months to receive.

The stimulus bill, earlier this year established the first-time homebuyers tax credit of $8,000.
The program was geared for anyone who has never owned a home or who hasn’t owned one within the past three years. It provides the credit to first-time buyers who close a loan on the purchase of their principal residence between Jan. 1 and Nov. 30, 2009, and the money doesn’t have to be repaid unless the recipient moves from that home within three years.The only problem with the program, many homebuilders have argued, is the tax credit takes awhile to arrive after a buyer files an amended tax return.

The MAHBA program was the brainchild of Glays. Glays began researching HUD rules and found out that an “anticipated tax credit” was exempt. He said,“Under HUD rules, any anticipated cash coming in can be used as part of the qualifications for underwriting a mortgage."

This program doesn’t secure the down payment with the property, but rather with the assignment of the tax credit. Glays said if you know you’ve got money coming in from any source, “you can get a mortgage on the premise that you’re going to get that money and it’s going to be liquid for you to use.”

Anyone who qualifies for the first-time homebuyers tax credit and who is buying a home from an MAHBA member qualifies for the association’s down-payment loan. The tax credit does have income limits and other restrictions.MAHBA will assess a $500 service fee for the loan, including the paperwork needed for the amended tax return and bank account setup to handle the arrival of the $8,000 tax credit.

PrivoCorp is expecting an increased volume of loans based on plans like these.

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