Why does the North Central Texas Housing Finance Corporation (NCTHFC) exist?
The North Central Texas Housing Finance Corporation was incorporated in 1981 as a nonprofit corporation and a public instrumentality of the Counties of Ellis, Hunt, Kaufman, Navarro and Rockwall Counties, and consisting the Cities of Cedar Hill, DeSoto, Duncanville, Lancaster and Waxahachie organized and existing under the Texas Housing Finance Corporations Act, Chapter 394, Local Government Code, for the public purpose of providing financing for the cost of residential ownership and development within the Counties that will provide decent, safe, and sanitary housing for persons of low and moderate income at prices they can afford. The Act authorizes the Corporation to issue its revenue obligations to accomplish such public purpose.
FIRST TIME HOME BUYER FAQ
Who is eligible for NCTHFC programs?
NCTHFC's mission is to increase access to, and availability of, safe, decent, and affordable housing. NCTHFC does this by removing barriers that face individuals in their search for housing in order to provide a better quality of life. For the requirements for our single family bond programs, click here
and mortgage credit certificate programs, click here.
What is NCTHFC's Eligible Loan Area?
The NCTHFC serves the Counties of Ellis, Hunt, Kaufman, Navarro and Rockwall Counties, and consisting the Cities of Cedar Hill, DeSoto, Duncanville, Lancaster and Waxahachie. Please click here
for a map of the areas served.
If interested in purchasing a home in an area not listed above, please contact Mary Bert-Koelling at 214-681-3311 or firstname.lastname@example.org.
Is there a residency requirement for program participation?
The NCTHFC programs do not require a buyer to have lived in Texas for a certain period of time; however, the home to be purchased must be located in the Eligible Loan Area and used as the primary residence of thehomebuyer.
What is the definition of a first time homebuyer?
A first-time homebuyer is an individual or family that has not owned or had an ownership interest in any residence during the last three years as their principal residence.
What is meant by primary, or principal, residence?
The primary residence is the home in which you intend to live on a permanent basis.
I've heard that only homes in economically distressed areas qualify under these programs. Is that true?
The property does not have to be in an economically distressed area. Any new or existing home in the Eligible Loan Area that does not exceed the maximum purchase price limits is eligible. Your Participating Lender
can help you determine if you and your home qualify.
How do I apply for a mortgage loan under the programs?
Eligible borrowers need to contact one of the Participating Lenders
to assist with the application and qualifying process.
Can I buy a second home using this financing?
No, this program is restricted to those persons who have not owned a home in the past three years as their principal residence. Additionally, to qualify for purchase under this program, the home must be your primary residence. Therefore, vacation homes would not qualify under this program.
In the event I sell the home, do I have to pay back any portion of the grant?
The only time you might have to pay back a portion of the assistance, would be if you sell the home within nine years of buying the home. This is called recapture tax.
Recapture tax is owed only when ALL three of the following events occur:
- You sell your home within nine years,
- Earning significantly more income than when you bought the home, and
- Have a gain from the sale of your home.
Recapture tax is a federal tax that a borrower may be required to pay from the net profit they receive from the sale of their home. If they have to pay recapture tax, it would be due when they file their federal income tax for the year in which they sell their home. The maximum recapture tax is 6.25% of the original principal balance of the loan or 50% of the gain on the sale of the home, whichever is less. For more information read "Reality and Recapture
" and "Recapture Tax Frequently Asked Questions
MORTGAGE CREDIT CERTIFICATE PROGRAM FAQ
What is an MCC?
An MCC is a federal income tax credit designed to assist persons better afford individual ownership of housing. With an MCC, the qualified homebuyer is eligible to write off a portion of the annual interest paid on the mortgage as a special tax credit, not to exceed $2,000, during each year that they occupy the home as their Principal Residence. The portion or amount of the tax credit is equal to the mortgage credit rate on the MCC (for example 35%) multiplied by the annual interest paid. This credit reduces the federal income taxes of the buyer, resulting in an increase in the buyer's net earnings. Increased buyer income results in increased buyer capacity to qualify for the mortgage loan. The MCC has the potential of saving the MCC holder thousands of dollars over the life of the loan.
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. Therefore, with a deduction, only a percentage of the amount deducted is realized in savings.
The homebuyer may receive the complete MCC credit savings annually at the time they file their tax returns or monthly by adjusting his or her federal income tax withholding by filing a revised Form W-4 with his or her employer. By taking this latter action, the number of exemptions will increase, reducing the amount of taxes withheld and increasing the buyer's disposable net income.
Taxpayers who file itemized returns may take a deduction for his or her mortgage interest paid each year, less the amount equal to the tax credit taken.
In any event, when the homebuyer files his or her taxes each year, they must fill out IRS Form 8396 and attach a copy of their MCC with his or her filed taxes.
This is not intended to be a full explanation, nor an assurance that such information will guarantee compliance with the tax laws. We encourage the homebuyer to contact their tax advisor or their employer to help them with the necessary tax forms and, if they so choose, to properly adjust their tax withholding.
If the amount of the MCC credit exceeds the MCC holder's tax liability, reduced by any other personal credits for the tax year, the unused portion of the credit can be carried forward to the next three tax years or until used, whichever comes first. The homebuyer will have to keep track of the unused credit each year. The current year credit is applied first and then the oldest amount of unused credit applied next.
Can a Homebuyer apply for a MCC after they have closed on their mortgage?
No, a homebuyer must apply and be preliminarily approved for the MCC prior to closing on their mortgage.
What loans types can be used with the MCC?
The Program does not place restrictions on the mortgage financing with regard to type, term or rate. However, only first mortgages (as opposed to second mortgages) qualify. In addition, mortgages funded with a qualified mortgage bond or a qualified veteran's mortgage bond are not eligible.
Does a Homebuyer lose their credit if they refinance their mortgage?
In most cases, no. You can have your certificate re-issued if your current principal balance is less than your original mortgage balance was.
How does the Mortgage Credit Certificate work?
With a Mortgage Credit Certificate (MCC), 35% of the mortgage interest is a tax credit-a dollar-for-dollar reduction of income tax liability for the life of the loan. The remaining 65% mortgage interest continues to qualify as an itemized tax deduction for the homebuyer.
Prospective homeowners can obtain an MCC when applying for a mortgage loan at any Participating Lender
. The mortgage loan must be new, not the refinancing of an existing mortgage loan. Lenders vary in their requirements for mortgage loans.
How do you figure the tax credit the Homebuyer can receive?
The mortgage credit can be calculated as follows: Loan amount x loan interest rate x percent of credit allowed = amount of credit. The maximum credit cannot exceed $2,000 annually.
Where does a Homebuyer obtain an MCC?
A homebuyer applies for the MCC at the same time they make a formal application for a mortgage. Lenders vary in their requirements for mortgage loan application, but generally you will have made a purchase offeron a specific residential property and will be ready to supply credit information, employment data, and other information to the lender. There will be a non-refundable fee to make application for an MCC.
How long does the credit certificate last?
Each year, the credit certificate will be calculated on the basis of the certificate credit rate times the interest paid on the mortgage loan that year. The MCC will be in effect for the life of the original mortgage loan, so long as the home remains the principal residence of the homebuyer and they pay a mortgage.
What are the MCC requirements?
Federal, IRS, and state regulations apply to everyone who obtains an MCC. These include:
- Cannot have had an ownership interest in a principal residence at any time in the last three years, unless you apply for a loan in an area designated as economically distressed or in the Rita GO Zone. In these areas designated as economically distressed or in the Rita GO Zone, you do not have to be a first-time homebuyer.
- The home you buy must be located in the Eligible Loan Area and used as the homebuyer's principal residence after they obtain the mortgage.
- The mortgage loan must be a new loan, not the refinancing of an existing mortgage loan or land contract.
- Cannot exceed the income click here and purchase price limits click here established.
What kinds of properties are eligible?
An MCC can be used for either new or existing single-family homes, detached or attached structures, consisting of not more than four connected dwelling units intended for residential housing, each for one family,or a single unit in a condominium, or townhouse. A single unit in a duplex, triplex, or fourplex, or an entire duplex, triplex, or fourplex can be financed, provided that one of the units will be occupiedby theApplicant and the Residence was first occupied for residential purposes at least five years prior to origination of the mortgage loan. However, this five-year requirement does not apply to a single unit ina duplex.
Manufactured homes are also eligible, but they must meet agency guidelines and Program requirements. To qualify, a manufactured home must be manufactured in a factory after June 15, 1976 that is delivered to a home site in more than one section and affixed on a permanent foundation. The dimensions of the completed dwelling shall be not less than 20 feet by 40 feet, the roof must be sloping, and the siding and roofing must be the same as those found in site built dwellings.
Mobile homes are allowed but must meet agency guidelines and be permanently affixed to the ground with a poured foundation, and taxed as real property.
The following types of properties are not eligible for the Program:
- Rental homes
- Cooperative housing
- Home used as investment property
- Recreational, vacation or "second" homes
- Motor homes, campers and similar vehicles
Property being purchased must meet the applicable agency guidelines and be located in the Eligible Loan Area.
How does a homebuyer apply for an MCC?
The homebuyer may obtain an MCC through any of the approved lenders
. The homebuyer should apply for the MCC at the same time he or she makes a formal application for a mortgage loan. The homebuyer should have a signed purchase offer in hand to buy a house and be ready to supply credit information, employment data and other information to the Lender.
There is no allocation of Mortgage Credit Certificates by the Lender. After an application is filed, the Lender will arrange with the Program Administrator to reserve an allocation for an MCC assisted mortgage loan. This reservation (MCC Commitment) will hold the MCC while the Lender and the Program Administrator are processing the application.
Can the $7,500 First-Time Homebuyer Tax Credit be used in conjunction with the Mortgage Credit Certificate Program?
H.R. 3221 was silent in regards to use of the $7,500 First-Time Homebuyer Tax Credit with the Mortgage Credit Certificate Program. Therefore, homebuyers need to consult a tax advisor to determine if it can be used with the Mortgage Credit Certificate Program.
What is the $7,500 First-Time Homebuyer Tax Credit?
The $7,500 First-Time Homebuyer Tax Credit is a "loan" from the IRS to first time homebuyers who close on the purchase of a home after April 9, 2008 and through July 1, 2009. Homebuyers can buy a house and claim on their 2008 or 2009 tax return a tax credit of 10 percent of the purchase price of the house, but the total credit cannot exceed $7,500 for one qualified house purchase. If a household files their taxes as "married filing separately", then the credit of $7,500 is claimed as a $3,750 credit on each of the two returns. The loan is "interest free" repayable in annual installments over a 15 year period (e.g. $7,500 credit would be repayable in 15 equal annual installments of $500 commencing with the second tax year after purchase). Since this is a credit, the homebuyer would deduct the credit from the taxes owed. For example, if a married couple filing jointly owed $5,000 when they calculated their 2008 tax and were eligible for the full $7,500 tax credit, they would receive a tax refund of $2,500 ($7,500 tax credit less tax owed). New homebuyers anticipating the credit can adjust the current payroll tax withholding rate with their employer to realize the benefits of the credit sooner.