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1. Pay off the second mortgage with the Federal First Time Homebuyer Tax Credit.
2. Pay off the second mortgage over 29 years - and save the tax credit to pay for future emergencies, make home improvements, or pay off/pay down existing debt.
3. Make principal payments on the second mortgage before the repayment period begins; this will reduce the required monthly payments for the remaining 29 years on the second mortgage.
The maximum loan amount for the first mortgage is the maximum FHA mortgage, and the maximum loan amount for the second mortgage is up to 5% of the sales price (no cash back). VHDA does not guarantee borrowers' eligibility for the Federal First Time Homebuyer Tax Credit. Borrowers can file an amended tax return after closing, and should consult a tax advisor or the IRS for complete eligibility criteria. Information is available at http://www.irs.gov. If borrowers are not eligible for the First Time Homebuyer Tax Credit, or the tax refund (if any) is not enough to repay the First Time Homebuyer Tax Credit plus loan, borrowers are still obligated to repay the second mortgage, plus all applicable interest. For more information, visit www.vhda.com or call 877-VHDA-123.
The release of VHDA's program follows HUD's May 12 announcement that FHA approved lenders are permitted to "monetize" the Federal First Time Homebuyer Tax Credit through short-term bridge loans. HUD's program DOES NOT allow a buyer to use a conventional lender to monetize the tax credit to reach the 3.5% down payment, although they CAN use it for closing costs and pre-paids. The only way a homebuyer can use the tax credit for down payment (to reach the FHA 3.5%) is if the buyer uses an FHA-approved non-profit or instrumentality of government. For more information, click here to read HUD's mortgagee letter.
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