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Home Mortgage Assistance Programsby Tryg Arneson In recent years many financial assistance programs have been developed to assist buyers in acquiring a home. These programs are generally designed for first time homeowners and families with low to moderate income. DOWN PAYMENT ASSISTANCE PROGRAMS (DAPs) provide funds needed to close a home purchase. They contribute additional funds that can be used to meet a buyer's minimum required investment and/or pay mortgage loan closing costs. These programs come in many formats. Some are outright grants that require no repayment. Others include unsecured loans that need only be repaid when the home is sold or if a borrower moves from the property before a certain period. Other programs offer deferred-payment second mortgages or loans with an interest below the market. Some programs involve a combination of these formats. MORTGAGE CREDIT CERTIFICATES (MCC) assist borrowers with their monthly payments. Under current Internal Revenue Service Tax Codes, home mortgage interest is deductible. For borrowers meeting certain income limitations, the IRS will allow lower withholding tax deductions from borrowers' paycheck. The increase in take-home pay enables borrowers to qualify for a higher monthly housing payment. SUBSIDIZED INTEREST RATE LOANS are offered by many states, counties and cities. Local government municipal bonds are used to provide funds for home mortgages. Municipal bonds are exempt from some taxation, reducing the interest rates for these mortgages; lower rates increase a borrower's purchasing power and/or reduce their monthly housing payments. While mortgage assistance programs increase home ownership opportunities, most come with restrictive covenants. Many have maximum household income limitations. Early and profitable sale of a home can result in tax penalties when the IRS "recaptures" tax benefits received by a homeowner participating in a program. Some restrict a homeowner's ability to sell a home by requiring a new buyer to also meet the guidelines of the assistance program. Careful review of both the requirements and restrictions of these programs is essential. Most of the programs are administered by local government agencies, but the loan application and process are done by local mortgage professionals. Information can also be obtained by calling the local city housing authority or mayor's or city manager's office. Most phone directories have a "blue page" section listing community services such as housing, financial assistance or community development. Some programs are administered at the county level with similar phone listings available. Subsidized interest rate loans are usually administered by state housing finance agencies and offered through mortgage lenders. Typically these agencies do not act as direct lenders except under very limited circumstances. Additional housing assistance information can be obtained from the nearest US Department of Housing and Urban Development (HUD), Federal Housing Administration (FHA) office, listed under U.S. Government in the phone directory of those cities in which an HUD or FHA office is located. There are many Federal, state and local housing assistance programs designed to help create home ownership opportunities. Consumers should research various programs available in their area that meet their specific financial needs. Generally, each agency provides written material outlining the programs and a list of mortgage professionals that can help in the application process. Return to Mortgage Articles / More About Down Payment Assistance |
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