A new program is about to roll out to help first-time home buyers. So far it's been reported about in a couple of places I could find, The Capitol Record in Olympia, and a short article in the Seattle Times. But I think this is going to be a big deal. I first heard about this from one of the representatives in our office to Washington Realtors. Now, those who know me well know that I am usually a major critic of both the National Realtor Association and the Washington Realtors. But if this program actually comes out in the format they are talking about, I may be converted to a fan after all. It not a done deal yet, but it's getting close and if the minor IRS regulation in the way gets changed quickly, it looks likely.
Here's how it would work: Those who qualify for the up to $8,000 Federal Tax Credit would could use the funds in advance as down payment and closing cost assistance at the time of purchase.
The State legislature would allocate $25 million of state funds into interest-earning accounts at an FDIC-insured bank. The bank would provide a revolving line of credit to the Washington State Housing Financing Commission to greatly expand its down payment bridge-loan efforts. The Washington Realtors have pledged $400,000 as a backstop to cover any unexpected losses to the state. Prospective borrowers need to take a First Time Homeowners class administered by the Washington State Housing Finance Commission and may be required to assign their IRS tax credit refund to the lender. A second mortgage may be attached to their home if they fail to pay it back.
This could be just the kick in the pants that the market needs to jump start it back to life. Up to now, none of the federal or state programs have made a huge difference. The $8,000 credit only works for lower and middle income participants, exactly the people who often don't have enough savings to purchase a home.
Watch for more to come…