PARAMOUNT MORTGAGE - LENDER'S BLOG

St. Louis - The Missouri Housing Development Commission (MHDC) has developed a new product for first-time homebuyers – the Tax Credit Advance Loan (TCAL).  First time homebuyers can receive a portion of their $7,500 federal first-time homebuyer tax credit to use as a down payment for purchase. This program is the first of its kind in the nation.

The Housing and Economic Recovery Act of 2008 passed by Congress last summer offered the $7,500 tax credit to encourage new homebuyers to purchase homes and stimulate the housing market. However, the federal tax credit has been largely ineffective.

The main shortcoming is that the homebuyer doesn’t receive the money until several months after the home has been purchased and the federal income tax has been filed. MHDC’s TCAL program eliminates the down payment obstacle facing these first-time homebuyers.

How the MHDC TCAL program works:
MHDC makes a second mortgage to the homebuyer at the time of closing worth the lesser amount of 6% of the home purchase price or the TCAL limit of $6,750. Any TCAL funds received can then be applied to down payment or closing costs.

The tax credit advance loan is paired with MHDC financing for a safe, 30 year fixed-rate mortgage. Loans are made through Paramount Mortgage, a certified lender. The homebuyer then files for the federal tax credit and uses the credit refund to pay off the MHDC tax credit advance loan.

Paying off the tax credit advance loan by MHDC’s June 1, 2010 deadline ensures the homeowner pays no interest other than a modest servicing fee. If the tax credit advance loan is not paid by the deadline, principal and interest payments begin automatically to repay the loan over 10 years.

• Funds available for immediate home purchase
• No waiting for your tax credit funds
• Up to $6,750 available for closing or down payment costs
• No repayment until June 1, 2010
• Household incomes up to $85,000

MHDC will review the last 2 years of tax returns to determine if the borrower will be eligible for the maximum second mortgage amount. In addition, the borrower must successfully complete an online credit counseling seminar which will ensure the borrower understands the terms of the loan, the requirement to obtain the tax credit, and the repayment terms of the tax credit.

Link: MHDC’s TCAL