TALLAHASSEE, Fla. – July 1, 2009 – Florida created a program to help first-time homebuyers get their federal tax credit early, allowing them to use up to $8,000 toward a downpayment. The effective date for the program is July 1; however, it will probably be another few weeks before the funds are available. As a result, some Realtors struggling to help homebuyers find the system confusing.
While most first-time homebuyers qualify for the tax credit (given by the government as an income tax rebate regardless of tax owed), they once had to buy a home first, submit the info to the IRS through their tax return, and wait for the $8,000 rebate. To help these buyers get the money early enough to use it as a downpayment, the State of Florida created a program of bridge loans, the Florida Homebuyer Opportunity Program (FLHOP), where money can be borrowed from the state and then paid back after the new homeowner receives his tax credit.
Under a different federal program, the Federal Housing Administration (FHA) has done something similar, yet with a significant difference: The federal program applies to FHA loans only, and buyers must still come up with a minimum downpayment of 3.5 percent.
“FAR’s Office of Public Policy has been getting a lot of questions from across the state regarding downpayment assistance for those who qualify for the federal first-time homebuyer tax credit,” says Florida Association of Realtors (FAR) Vice President of Public Policy John Sebree. “Given that there is a state downpayment plan and a federal downpayment plan (and at least one special exemption), it definitely gets confusing, and details have been slow to emerge. Many Florida Realtors say local housing authorities don’t have all the information they need to move forward with the state program, and some Realtors report that bankers are steering clear of the downpayment assistance programs altogether.”
Florida Homebuyer Opportunity Program (FLHOP)
The Florida Legislature created the state program during the recent legislative session, and it’s part of the 2010 budget effective July 1, 2009. Many details remain sketchy, but Sebree reports the following:
• Money for homebuyers may not be available until the first week of August. Lawmakers funded the program through doc stamp taxes applicable in the new fiscal year rather than through a lump sum commitment; and since today is the start of the new fiscal year, the program won’t be fully funded until the state collects new doc stamp taxes.
• Florida’s downpayment loan program can work with FHA loans. Florida Housing Finance Corporation (FHFC) – the state agency that funnels housing money to local housing agencies – received confirmation from FHA that borrowers who access the $8,000 tax credit through a state or local government program may use it to make up the required 3.5 percent downpayment, unlike the FHA downpayment loan program through private lenders.
• Florida’s local housing administrators will oversee the downpayment funds at the local level. (To find the administrator in your area, go to: http://apps.floridahousing.org/StandAlone/FHFC_ECM/AppPage_SHIPLGContacts.aspx). For local housing authorities, the program is similar to the SHIP program (State Housing Initiatives Partnership) with one major difference – the income limits. Currently, SHIP uses Area Median Income (AMI) and those are typically lower, and calculated differently, than the federal tax credit limit of $75,000. The $75,000 for a single income tax filer ($150,000 for joint filers) will be used for FLHOP.
• Realtors can start to promote the program to potential homebuyers. It takes time to close on a home, and local housing authorities should be taking applications now.
• FHFC says they’ve trained local administrators on procedures for the Florida downpayment program. Local housing authorities will have flexibility over the $8,000 loan, be able to include penalties, and create a structure dictating how the new homebuyer will pay back the money.
“It’s important to note that this money is a bridge loan to buyers; but once it’s repaid, local governments and housing authorities can keep the money and use it locally for affordable housing projects,” Sebree says. “This is a win/win for them. If the offices seem unwilling to work with Realtors, they probably don’t understand the program themselves yet.”
For specific questions about the $8,000 tax credit, homebuyers should consult a tax professional.
Resources for understanding the tax credit and bridge loans
FAR’s Homebuyer Center: http://www.floridarealtors.org/AboutFar/homebuyercenter/index.cfm
NAR’s The Basics: 2009 First-Time Home Buyer Tax Credit: http://www.realtor.org/home_buyers_and_sellers/2009_first_time_home_buyer_tax_credit?lid=ronav0019.
© 2009 FLORIDA ASSOCIATION OF REALTORS®
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