The following piece was provided to me by one of my colleagues in the lending arena. Ellis Ferguson is a senior loan officer with Prospect Mortgage and has graciously provided the following information regarding the Nevada Rural Housing Authority’s Home at Last Mortgage Tax Credit program. If you’re interested, Ellis’ contact info follows the piece. – Guy
One of the greatest attributes of being a senior loan officer with Prospect Mortgage is utilizing the various loan products available in helping homebuyer’s purchase their first home. Today I am writing about a hidden jewel of a program that has been available to Nevada families since early 2009.
Did you miss the federal tax credit that ended earlier this year? Well if you did, and are still looking to buy a home, you may still qualify for a tax credit program that is offered to Nevada first time home buyers and qualified Veterans buying in rural Nevada. The program is Nevada Rural Housing Authority’s Home at Last “MCC or Mortgage Tax Credit.” The MCC program provides dollar for dollar federal tax credit equal to 20%-30% of the interest paid on a home mortgage loan. The tax credit is available to qualified first time home buyers, and eligible veterans, every year as long as they live in the home as their principle residence. Loans up to $190,000.00 receive a 30% credit and loans of more than $190,000.00 receive a 20% credit.
Carla Manthe, Chief operating Officer of Nevada Rural Housing Authority reports there have been 147 loans resulting in over 23 million in mortgage activity. “The MCC program was launched as an alternative offering to our other loan programs during the credit freeze of 2008/2009. Although there has since been a re-normalization within the credit markets and we have brought back our bond loan and the down payment assistance programs, the MCC program continues to be well received within the Nevada real-estate marketplace”. The following are two examples of how the tax credit works and what the credit you potentially receive from this program based upon two purchase scenarios.
Home A
Loan Amount: $120,000
Interest rate: 5.5%
Approximate annual interest: $6,600
Tax credit: 30% of mortgage interest
Savings: Approximately $165 a month or $1,980 a year
Home B
Loan Amount: $200,000
Interest rate: 5.5%
Approximate annual interest: $11,000
Tax credit: 20% of mortgage interest
Savings: Approximately $183 a month or $2,200 a year
Unlike the expired federal tax credit which was a one time, lump sum payment, the MCC program continues to offer the tax credit each year of ownership and is based upon the actual mortgage interest paid. As illustrated in the example above these tax credits can be received $ 1,980.00 annually or $ 165.00 monthly back in your paycheck. Who wouldn’t want to receive an additional $ 1,980.00 annually or $ 165.00 monthly for buying a home? Another bonus: lenders can also use the additional income towards qualifying for the loan.
This program is a separate, value added program that is added to the underlying FHA, VA, Conventional or RHS or Bond loan programs. Like every mortgage program, there are established guidelines for this tax credit that lenders must follow in qualifying our clients for this program. The following are some of the basic requirements:
• The purchasers must be “first-time homebuyers”, defined as those that have not owned a home or received any mortgage interest deduction on their tax returns in the last 3 years. Qualified veterans who will live in the home as primary residence who are not “first time homebuyers “ are also eligible for this program.
• The MCC program is availble to households meeting the income requirements.
• There are no there are no minimum or maximum asset requirements for this program.
• The home purchased must be located in rural Nevada (population fewer than 100,000) and as such covers most of Nevada’s various counties. (Buyers are always surprised that Sparks NV and part of the un-incorporated areas of Reno still qualify for the program.)
• The loan amounts vary with each county but are based upon the current FHA county loan limits.
Unlike the federal tax credit program there are some nominal upfront fees incurred in the closing costs of the home purchase. These fees include a $75.00 application fee, a program participation fee of 1% of the loan amount plus $100.00. These charges may be paid by the seller, the buyer or split between the buyer and the seller. In certain cases the fees may even be financed. It is common for home buyers using the MCC program to recover these costs within the first year of ownership.
Think of this MCC program like the installation of a solar panel array or wind turbine on your home. With these energy saving investments you could reduce or eliminate your home energy costs. Similarly with a small investment up front you can enjoy ongoing financial payback of the MCC tax credit each and every year of home ownership.
Nevada Rural Housing Web site link to MCC web site has a lot of helpful information as well as many helpful links further explaining additional details of this program.
Call any approved lenders listed to find out more about this program and take the next step towards your dream of home ownership!
Ellis Ferguson is a senior loan officer with Prospect Mortgage in Reno NV with over 9 years of Mortgage Lending experience. He can be reached at 775-332-1443, 775-225-1147 or ellis.ferguson@prospectmtg.com with any questions or comments.
MikeZ
CNN: “Buying a home now is a no-brainer”
http://money.cnn.com/2010/12/10/pf/buy_a_home_now.moneymag/index.htm
smarten
I know our permabears are going to go off the hook, but there’s once sentence in your link MikeZ that is worthy of repeat: “home values may waffle over the coming year, but because Americans take out such large, long mortgages, rates are what really matter.”
Let’s take a $250K purchase with 20% down assuming a 4.75% 30 year fixed rate mortgage. Over the 30 year term of the mortgage, you will pay nearly $175.6K in interest. Now let’s take the same purchase and assume the fixed interest rate is only 1% high [5.75%]. Over the 30 year term of the mortgage, you will pay nearly $220.2K in interest – a whopping $44.6K difference or nearly 18% of your purchase price.
So let’s assume your made this mythical purchase and locked in a 4.75% fixed mortgage rate. In actuality, the value of your house would have to drop some 18% in value [assuming mortgage rates increased, which they will (it’s just a matter of time)] for it to have made more financial sense to wait versus purchase now. And if mortgage rates are higher than 5.75% when you actually purchase, the drop in value has to be even greater for you to have made a savvy financial decision.
Now I realize this assumes you require a 80% LTV purchase money mortgage; you keep the same mortgage for the full 30 year term; that mortgage rates increase a good 1% or more in the future; and you delay your purchase until then. But if you intend to be a long time owner [of your principle residence], it really is the mortgage interest rate you’re able to lock in which becomes the most important aspect of your purchase.
Of course if you’re a perma player, I guess you should keep…playing.
Sully
smarten, although your comment make sense, it doesn’t automatically mean anyone that’s not buying right now is a permabear! I can think of no less than a dozen other reasons for not buying, although I do agree interest rates will soon start moving up fast.
Sully
sorry, meant 1/2 dozen reasons. List isn’t that long. 🙂
Smarten's Vanishing Equity
Smarten has gone completely off the rails here, failing to realize, much less acknowledge, that as mortgage rates creep higher, house prices creep lower. That $250,000 house at 4.75% is a $223,472 house at 5.75%. It is always in ones best interest to have a lower principle balance rather than a lower rate. While the payment of $1304,12 and the term of 360 months is the same in both instance, the debtor with the lower principle balance is in a much more enviable position insofar as his/her ability to pay the loan off early, or refinance to a lower rate down the road. Also, he/she gets a larger mortgage interest deduction on taxes.
MikeZ
Smarten has gone completely off the rails here, failing to realize, much less acknowledge, that as mortgage rates creep higher, house prices creep lower.
You say that as if it’s fact, but it isn’t. Higher mortgage rates will tend to put downward pressure on prices, but pressure from one factor does not equal lower prices. Still confused? Take a look at median home prices in the mid-to-late 1970s, with 15-20% interest rates.
smarten
SVE states as if it were a matter of fact that “that $250,000 house at 4.75% is a $223,472 house at 5.75%.” I haven’t checked rates today, but this morning there was another big increase in FNMA’s par pricing. It could very well be that today’s 30 year fixed conforming loan amount rate with 0% origination fees is 4.875% or maybe, even 5%. Contrast this with the rate a month ago [3.875%-4%] and you now have your 1% rate differential in a very, very short period of time. So according to SVE’s logic, there has been a 9% drop in prices in barely a month to make up for the mortgage rate increase. Oh really? And in what data are we going to see this drop?
I do agree with SVE’s statement that “it is always in ones best interest to have a lower principle balance rather than a lower rate.” But there’s not always a direct inverse correlation between the two. My attempted points were twofold. First, mortgage interest rates for most of us should be of nearly as much concern as pricing [even though oftentimes it is not]. If you make a mistake in pricing yet not in mortgage rates, time will eventually heel all wounds. But make the opposite mistake, and you can pay very dearly over the 30 year term. Second, both should be of concern. You should consider the prospect of higher/lower pricing as well as the prospect of higher/lower financing costs. Given mortgage rates may have hit their lows, if you’re a purchaser and keep waiting for appreciably lower prices, you may just lose out on both counts. But to characterize this kind of thinking as “ha[ving] gone completely off the rails” is just plain nonsense.
And again, this is standard Mr. BB M.O. Continue to attack the messenger because you disagree with his/her message.
Reno Ignoramus
SVE’s point has merit. Most people “buy the payment” whether they are buying a car, a home entertainment center, or a house. How many people buy a big ticket item and say I don’t care what the monthly payment will be? The question for almost everybody is: what is the monthly nut?
To the extent that rising interest rates means that people can afford less house for the same monthly nut, buyers are necessarily forced into less expensive houses.
The reason that house prices did not appreciably decline in the late 70s and early 80s (they did not appreciably increase either) is because nobody was buying with new money. Nobody was paying 17.5% for new mortgage money. Those were the days of the so-called “wrap around mortgage” which was a subertfuge to allow the buyer to assume the existing note despite the due on sale clause.
Walter
Hell, RI, most people don’t just “buy the payment” for big ticket items. Most people today “buy the payment” for their cell phone plan, their cable TV service, their kid’s daycare provider, and their washer and dryer loan.
“What’s the monthly payment?” has become the mantra of modern life in America.
Buying in rural Nevada? This loan program may be for you | Reno … | prospect mortgage
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MikeZ
The reason that house prices did not appreciably decline in the late 70s and early 80s (they did not appreciably increase either)
Check again. http://mysite.verizon.net/vzeqrguz/housingbubble/
Inflation-adjusted home prices rose rapidly in the mid-late 1970s against rising home mortgage interest rates and then fell just as rapidly in the early-mid 1980s, while interest rates were falling.
Downward and upward pressures from mortgage rates tend to be mild, even 40-50% relative swings in rates!, and do not necessarily move home prices. There are much bigger pressures on home prices.
Jethro
I don’t know what all them fancee graphs mean, but even an idiot like me can understand that if I got $1200 to spend on a house payment, that I kin buy a fancier more expensive house at 5% interest than I kin at 6%. I got me sum good school learnin and I can figur out that I kin buy more fer lower interest than I kin fer higher interest.
Jethro's Mama
Dat’s wat I’m sayin sun, I rased you rite!
RRB reader
Funny stuff Mike Z.
Ali Velshi? Really? When we start valuing the opinions of these shills (Suze Orman, Ben Stein, and Ali Velshi) we are grasping at straws.
Craig Ballhagen
Diane, thanks for your blog. I am in Boise – go Broncos! The Wolf Pack sure set us straight.
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geopower
Concerning the NRHA Home at Last program:
I had the luck to qualify for this program when I bought earlier this year. As Guy says, there is a fee to participate in the program, which for me was a little over 2K. I bought in “unincorporated” Reno, so I can verify that they consider this rural and don’t hassle you about actually living in a city but applying for a “rural” program. I felt a bit guilty over this, worrying that the money wouldn’t be there for low-income rural homebuyers who really needed it, or that it was coming from the state budget while education funding and such was being cut. CJ who runs the program was kind enough to explain where the money comes from. ” Every state receives what is called a “private activity bond cap allocation” every year. These funds are determined on a federal level from the Treasury department. We can use this allocation to issue tax-exempt bonds or we can exchange this allocation to offer tax benefits to home buyers. So, the short answer is that these funds come from the federal government. ” The Mortgage Credit Certificate program had sufficient funds when I bought this spring that they did not anticipate having to turn away applicants.
The application process was easy, and I expect this year’s mortgage tax credit to essentially cover the cost of the application fee, which I can confirm once tax time rolls around.
One caveat to the program that isn’t mentioned above- the home must be your primary residence and remain so for 10 years. They have a claw-back provision to get back some of the credit given if you sell before 10 years. So, be aware, you should plan to live in your house for a decade, or be able to forfeit some of the financial benefits of the program.
thinking about it
Could someone please define what parts of Reno are unincorporated? Is there a website or a map that will show unincorporated Reno?
geopower
The city of reno land use plan has maps showing what is within the city. The document can be found at: http://www.reno.gov/Index.aspx?page=755 under land use plan.
The easiest way I’ve found is to use Zillow map search though, they have the city boundaries loaded in their map server and they show up automatically.
inthebusiness
I have a client that will be taking advantage of this first time homebuyer’s tax credit. I was pleased to hear that the Nevada Rural Housing Authority’s Home at Last Mortgage Tax Credit program includes Sparks! The population of Sparks as of July, 2009 – 89,346. My buyer is getting a great deal on his first home and a significant tax credit to boot. Thank you Ellis and Guy for providing additional information.