Lincoln Journal Star – The Nebraska Investment Finance Authority announced a new loan program Friday to help first-time homebuyers use a $8,000 federal tax credit to help with down payments and closing costs.
The program, called the Advance Buyer Credit Loan Program ABC mortgage, offers a second mortgage based on the expectation of the credit.
Buyers eligible for the tax credit typically file for a tax refund after completing the purchase of a home – a process that takes around three months, according to NIFA.
But many of these first-time purchasers need the dollars provided by the tax credit to pay a down payments and to pay closing costs.
The ABC mortgage allows them to do that by providing a second mortgage loan that advances a portion of the federal tax credit to the buyer at the time the regular NIFA first mortgage loan is closed. When the buyer receives the tax credit refund and uses the refund to repay the ABC mortgage within 120 days of home purchase, the buyer receives a one-half point rate reduction on the regular first mortgage loan.
If the borrower does not repay the ABC mortgage within 120 days, the ABC mortgage will be payable over 10 years, and both the first mortgage loan and the ABC mortgage will will continue to bear interest at their original rates.
“Our team has worked very hard to develop a product to help the borrower use the new tax credit immediately,” said NIFA Executive Director Tim Kenney. He said the agency received special permission from the Federal Housing Authority to enable the buyer to lower the first mortgage loan interest rate when the buyer repays the tax-credit advance loan within 120 days
The ABC mortgage is available only to first-time homebuyers, with certain income and purchase price restrictions, on FHA and some RD loans that are eligible for financing under NIFA’s single-family mortgage program.
More information about the new loan product is available on the NIFA Web site (http://www.nifa.org) or at any NIFA participating lender in Nebraska.