The State of Georgia is now offering a tax credit for home buyers.  So, on top of the $8000 tax credit for first time home buyers from the Federal Government, now buyers around metro Atlanta, and the state of Georgia, will receive up to $1800 from the State.

The details are a little complicated, but the basis is that the tax credit is given for owner occupied purchases, which are purchased between June 1 and November 30, 2009.  The credit is for $1800 or 1.2% of the purchase price, whichever is less.  So, to get the full credit the purchase would need to be for $150,000 or greater.  

And, the dates that the home went on the market have an effect on qualifying for the tax credit, as well.  For this I have found the most succinct explanation from the NAMAR Organization:

In addition, eligible single family residences include 1) new single family residences; 2) previously occupied residences that were for sale prior to the May 11, 2009 and are still for sale after May 11, 2009; 3) owner-occupied residences with respect to which the owner’s acquisition debt is in default on or before March 1, 2009; and 4) residences where a foreclosure has taken place and are owned by the mortgagor or the mortgagor’s agent. 

So, more good news if you are a prospective home buyer around Atlanta.

No.  Well, Yes.  Um, Not quite yet.

I have had several Realtors and many borrowers ask the question, “Can I use the $8000 First Time Home Buyer Tax Credit as a down payment?”

First, I did have some borrowers claim their tax credit when they filed their taxes around April 15.  And they received the money, even before they bought their home.

Once taxes are filed, however, then the home buyer can either ammend the filed return using form 1040X, and file the IRS Form 5404 to claim the tax credit this year; or they can wait until they file taxes for 2009.  Either way, the home buyer will need a Settlement Statement to file.

Then, HUD got involved.  Then they didn’t.  And a lot of confusion has sprung up around that in the past few days.  You see, HUD issued a Mortgagee Letter on May 11 stating that buyers can claim the Tax Credit and use it as the Down Payment on a home at the closing table.

Then on May 13, that Mortgagee Letter disappeared from the HUD website – so the tax credit cannot be used as the down payment.

What happened is that HUD jumped the gun.  In principle, they said, it is okay to bring the tax credit to the closing table to serve as the down payment.  In practice, however, entities and means to get the tax credit to the closing table are not available/approved.

So, my best guess is that we will see this revisited by HUD in the very near future; but for now it is not possible.  The next best thing? Have the first time home buyer get a loan from family, from 401(k), etc, and bring that as the down payment.  Then, file the ammendment to the 2008 tax return, and reimburse the donor for the down payment a few weeks after closing.  So, if you are buying a home around Atlanta, and you have not owned a home in the past three years, then you are a first time home buyer, by definition, and sooner or later you will receive the tax credit, if all other criteria qualify.

I wrote in this blog some time ago about the Hope for Homeowers plan, which went into effect on October 1, 2008 with billions in government funding.  $320B, to be exact.

As of last month, April, an amazing stat came out.  Brian Sullivan of Fox News reported that to date the program has successfully helped modify the mortgages of 1US Homeowner.  And we know, ‘One is the lonliest number that you’ll ever see’.  Especially with that sort of funding behind the program.

There are a lot of reasons for the lack of effectiveness of this program; including that the existing mortgage holder would have to discount the note to 90% of the current value of the home to qualify for the FHA

endorsed refinance.  That has since been modified to 97% of the current home’s value.  Still, mortgage servicers do not want to discount the notes and take real losses that easily.

But, look on the bright side.  With the extreme effectiveness of this Hope for Homeowners program and the billions in taxpayer funds that were allocated to the program – well, government healthcare is coming for us all.  We’ve got that going for us.

If you are considering buying a property in an outlying county around metro Atlanta, then be sure to check out a USDA mortgage loan, otherwise known as a Rural Housing Loan.

USDA Funds Released – $10 Billion (yes, that’s billion with a B) has been allocated. According the USDA, about 25% have already been used to fund “purchase transactions only” that have been on HOLD since January 9, 2009. When the “dust” settles, money will be released for refi’s.. Not every community qualifies—but if it does, it’s the best thing since sliced bread!.

I agree, it is the best thing since sliced bread, since a USDA loan is 100% financing, at market rates, and has NO monthly Mortgage Insurance (MI).  I just closed one for a young couple who purchased a home in Winder, GA.  They came to closing, and got a check back for nearly all their earnest money.  Nice.