I mentioned in a previous blog that FHA announced they would provide a method for 1st time homebuyers to utilize the $8,000 Federal tax credit
at closing instead of waiting until the 2009 Income Tax Return is filed. The Illinois HOME START Loan Program is the answer to the
Illinois 1st time homebuyer who wants to take advantage of the Federal Tax Credit at closing on their new home.
As you probably know, The American Recovery and Reinvestment Act (ARRA) of 2009 provides eligible first time homebuyers with a one-time tax credit
of up to $8,000 that will enable them to save on their federal tax bill.
Through the HOME START Tax Credit Advance Loan, first time home buyers can utilize a 2nd short term loan for down payment assistance at closing.
The homebuyer MUST get their first loan through the HOME START Loan Program and then utilize the optional HOME START Tax Credit Advance Loan
in conjunction with the first mortgage as a short term 2nd loan.
The 2nd HOME START Tax Credit Advance Loan is at a 0% interest rate until June 30, 2010. If the loan is not repaid by June 30, 2010, then the remaining loan
amount becomes a ten year amortizing loan at 0.5% above the rate on the Home Start 30 Year Fixed Rate Loan. There is a $300 processing fee due at closing
for the 2nd loan. The current interest rate on the Illinois HOME START Loan Program is 6% but will fluctuate with market conditions.
The assumption is that the new homeowner will repay the loan when their taxes are filed in 2010 and they receive their tax refund.
Although the federal First Time Homebuyer Tax Credit allows for a maximum credit of 10% of the purchase price up to $8,000, the maximum
HOME START Tax Credit Advance Loan is a maximum of 3.5% of the purchase price up to $6,000. So, for example, if you purchase a home for $100,000,
the maximum HOME START Tax Credit Advance Loan is $3,500 ($100,000 X 3.5%). To take advantage of the maximum HOME START Tax Credit Advance Loan at closing,
the homebuyer would need to purchase a home for approx. $172,000 or more.
Please note: Although you may not be able to get a 2nd loan for the entire allowable federal First Time Homebuyer Tax Credit, you can still take a the full allowable
credit on your tax return. Using the same $100,000 example above, the federal First Time Homebuyer Tax Credit is 10% of the purchase price, which would be $10,000.
However the maximum allowable credit is $8,000. So when that 1st time homeowner files their 2009 taxes, they will be able to claim the federal
1st time homebuyer tax credit for $8,000 and use that credit to repay the 2nd HOME START Tax Credit Advance Loan for $3,500.
You must purchase your owner-occupied 1st home by November 30, 2009 to take advantage of the Illinois HOME START Tax Credit Advance Loan and/or
the federal First Time Homebuyer Tax Credit.
The first loan under the HOME START program is a 30 year fixed rate amortizing loan insured by the Federal Housing Administration (FHA) and
serviced by U.S. Bank Home Mortgage.
You can get further details on the federal First Time Homebuyer Tax Credit at http://www.irs.gov/newsroom/article/0,,id=204672,00.html .
More details on the Illinois HOME START Loan Program and HOME START Tax Credit Advance Loan and can be found at http://www.ihda.org/ViewPage.aspx?PageID=328 .
Participating lenders can be found at http://www.ihda.org/MapResults.aspx?ListTypeID=13&ListTypeSubID=8&County=will,du+page,cook .