FINANCIAL LITERACY

Term You Should Know: First Time Home Buyer Credit

The AICPA's website dedicated to financial literacy -- http://www.360financialliteracy.org – is a good place for CPAs and others in the industry to learn more about the terms that affect their work, and their clients' lives and businesses.

A hot issue in the market these days is housing, and financing options available to new homeowners.

"Now is a great time to buy a home, as long as you buy smart," said Richard Godfrey, Executive Director of Rhode Island Housing. "There are many new tools available for homebuyers, including the up to $8,000 tax credit being provided by the federal government. This credit is available to first-time homebuyers who purchase a home before November 30, 2009. Homeowners do not have to repay these funds as long as they live in the home for three years. The tax credit can also be used in conjunction with loans offered by Rhode Island Housing and Neighborhood Stabilization Program funds to leverage a homebuyer's purchase power even further."

Learn more about the national program from the website www.360financialliteracy.org.

From the site:

The Obama Administration announced on April 28, 2008, details of new efforts to help bring relief to responsible homeowners under the Making Home Affordable Program, including an effort to achieve greater affordability for homeowners by lowering payments on their second mortgages as well as a set of measures to help struggling borrowers stay in their homes.

The Second Lien Program will work in tandem with first lien modifications offered under the Home Affordable Modification Program to deliver a comprehensive affordability solution for struggling borrowers. Second mortgages can create significant challenges in helping borrowers avoid foreclosure, even when a first lien is modified.

Under the Second Lien Program, when a Home Affordable Modification is initiated on a first lien, servicers participating in the Second Lien Program will automatically reduce payments on the associated second lien according to a pre-set protocol. Alternatively, servicers will have the option to extinguish the second lien in return for a lump sum payment under a pre-set formula determined by Treasury, allowing servicers to target principal extinguishment to the borrowers where extinguishment is most appropriate.

Separately, the Administration has also announced steps to incorporate the Federal Housing Administration's (FHA) Hope for Homeowners into Making Home Affordable. Hope for Homeowners requires the holder of the mortgage to accept a payoff below the current market value of the home, allowing the borrower to refinance into a new FHA-guaranteed loan. Refinancing into a new loan below the home's market value takes a borrower from a position of being underwater to having equity in their home. By increasing a homeowner's equity in the home, Hope for Homeowners can produce a better outcome for borrowers who qualify.

Learn more at http://www.360financialliteracy.org.