@moneystinks wrote:
Ok a little more information - although I've decided to take the lower interest rate in lieu of the down payment asssitance as there are too many strings attached to the DPA for just $5,000 - the lower interest rate I come out better in the long run. This is in Texas so it only relates to them, I would assume. It is a Taxable Mortgage Program/Texas Mortgage Credit Certifcate.
Requirements/Restrictions: After closing (if you meet the criteria to receive) you must occupy the residence as your principal residence within 60 days. If you ever move, you will be required to immediately notify and it will be revoked. You have to be a first time home buyer and and fall into the income limits and home purchase price limtiation and have an eligible property.
If you receive the down payment assistance, you will be required to repay the down payment and/or closing cost at the end of the term of your loan or earlier if you sell, refinance, transfer or otherwise dispose of your home.
The Mortgage Tax Credit (MCC) is a % of the annual interest paid on your loan, not to exceed $2K per year. The credit can't be larger than your annaul federal income tax liability after all other credits and deductions have been taken into account. If you sell within 9 years you will have to pay back at laest 6.25% of the highest principal balance of your mortgage or 1/2 of your taxable gain on the sale of your residence (whichever is less). You may also have to pay a "recapture tax" if you meet one of the following: 1) the property ceases to be the principal residence in the full 9 years of ownership 2) there is a profit on the sale of the home 3) the household income increases significantly (5%) of what you entered the program under. This has to be paid to the IRS. If you refinance within 9 years you also have to pay the recapture tax.
Obviously this is specific to the program that I was trying to get in. However, since I usually get a 3% raise every year (sometimes 6%) I'd be paying the recapture t.ax within 2 years. There are so many strings attached to it, and life is uncertain in the best of times. While I certainly plan to live here at least 20 years if not longer, if interest rates fall in the next year, and its beneficial would like to refinance, but would again be penalized for doing so.....
once i received that document and read through it all (first time I had seen it was yesterday) my decision was easy.
Your criteria above is very similar to the criteria I have seen here in Palm Beach county too. I think you made a wise decision not accepting the funds based on the criteria posted. Like Dallas said earlier those programs usually have higher rates and higher fees as well as conditions that benefit everyone but the borrower! That you for posting specifics
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