January 26, 2010

• Program Eligibility
• Income & Purchase Price Limits
• Loan Programs
• Advance Buyer Credit (ABC) Loan Program
• Allowable Loan Products
• Affordable Housing Program (AHP) Grant
Funds
• Mortgage Credit Certificates (MCC’s)
• Recapture Tax

• 1 st Time Homebuyer
• Property must be Owner-Occupied
• Maximum Income Limits
• Maximum Purchase Price Limits
• Existing or New Construction
• Single family, qualified condominiums and 2-4 Unit,
Owner-Occupied Properties

• Each borrower must not have had an ownership interest in a principal residence at any time during the three years preceding the mortgage loan date.
• First-time homebuyer status is not required in target areas

Exceptions to First-Time Homebuyer Rule
• Loss of previous home by a court action
• Divorce
• Loss of previous home by natural disaster
• Fire, tornado
• Involuntary relocation of borrower by their employer to another location of the same employer because of employment reasons
• Must relocate to secure employment

• Purchase price is the cost of acquiring the property from the seller as a completed unit
• Limits are the same for existing and new construction properties
• New Construction is defined as a house that has never been occupied
• Property must be used for personal residence
• Residence cannot exceed15% of the total area being used for business (e.g., daycare, hair or nail salon, accountant)

(a) Area of residence:
Square foot calculation
(b) Area of surrounding land:
(c) Total area of residence and land:
(d) Area of residence used in trade or business:
1,200
6,300
7,500
400
(e) Area of surrounding land used in trade or business: 480
(f) Total area of residence and land used in a trade or business: 880
(g) Percentage of residence and land used in a trade or business
(line f divided by line c): 11.73%
Time usage calculation
(h) Average number of hours each week: 40
(i) Ratio of average number of hours each week divided by total number of hours in a week (168): 23.81%
Final business usage percentage
(j) Percentage of residence (line g) multiplied by ratio of hours worked (line i): 2.79%

• In related party transaction, NIFA purchase price is the greater of the purchase price or appraisal
• Income limits in Federally Targeted
Areas are higher
• 2-4 unit properties
– Must be at least 5 years old
– Purchase price limits are higher for these properties

• Max. household income limits are all sources of income for adults 18 years and older living in the property
• Income limits are categorized by family size of 1-2 persons or 3 or
More
• Maximum income for 1-2 persons is
100% of median income
• Maximum income for 3 or more persons is 115% of median income
• Income limits in Federally Targeted
Areas are higher

• IRS regulations require projecting maximum household income out for the next 12 months.
• Income for all adults 18 and over living in the household has to be included in the calculation.
• Projected raises, bonuses, overtime, commission and interest on assets over
$5,000 must be included.
• Income from all full-time and part-time jobs is included.
• NIFA projects total household income forward for the next 12 months.

INCOME SOURCES
BORROWER NAME:
HOURLY
WEEKLY
BI-WEEKLY
BI-MONTHLY
MONTHLY
HOURLY /PART-TIME
ANNUAL
ANNUAL TO DATE
OVER TIME
OVER TIME YTD
BONUS/COMMISSION/TIPS
CHILD SUPPORT
DIVIDENDS, INTEREST, ROYALTIES, TRUSTS.
ACTUAL OR IMPUTED INCOME FROM LIQUID
FAMILY ASSETS.
NET RENTAL INCOME
PENSION,SOCIAL SECURITY BENEFITS
VA COMPENSATION
UNEMPLOYMENT
PUBLIC ASSISTANCE
PROJECTED RAISE (HOURLY)
PROJECTED RAISE (ANNUALLY)
OTHER
TOTAL MONTHLY INCOME
SALARY/
INCOME
0.00
0.00
41,910.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
HOURS
RAISE
REC'V
TIME
WORKED
Sara Adams
40.00
15.50
13.00
5.00
7.00
5.00
MONTHLY
INCOME
0.00
0.00
3,223.85
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
TOTAL ANNUAL INCOME/COMMENTS
Includes regular pay plus shift differentials for
2009 YTD ($38,824.00) and YTD 2010 ($3086.00)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
40.00
12.00
11.75
9.00
1.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
3,223.85
[$1,724 + $2,350 + $4,074]
38,686.15

CO-BORROWER OR NON-PURCHASING SPOUSE NAME:
HOURLY
WEEKLY
BI-WEEKLY
BI-MONTHLY
MONTHLY
HOURLY/PART-TIME
ANNUAL
ANNUAL TO DATE
OVER TIME
OVER TIME YTD
BONUS/COMMISSION/TIPS
CHILD SUPPORT
0.00
0.00
2,319.00
0.00
0.00
12.75
0.00
0.00
0.00
0.00
0.00
0.00
DIVIDENDS, INTEREST, ROYALTIES, TRUSTS. ACTUAL
OR IMPUTED INCOME FROM LIQUID FAMILY ASSETS.
NET RENTAL INCOME
PENSION,SOCIAL SECURITY BENEFITS
VA COMPENSATION
UNEMPLOYMENT
PUBLIC ASSISTANCE
PROJECTED RAISE (HOURLY)
PROJECTED RAISE (ANNUALLY)
OTHER
TOTAL MONTHLY INCOME
0.00
0.00
0.00
0.00
0.00
0.00
0.25
0.00
0.00
40.00
12.00
2.00
5.00
20.00
40.00
Trevor Adams
2,210.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
7.50
0.00
12.50
5.50
0.00
0.00
185.52
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
7.22
0.00
0.00
2,402.74
Includes OT pay for YTD 2009 ($2,214) and
YTD 2010 ($105)
Projected raise effective 10-01-10
28,832.91

NON-PURCHASING OCCUPANT NAME:
HOURLY
WEEKLY
BI-WEEKLY
BI-MONTHLY
MONTHLY
HOURLY/PART-TIME
ANNUAL
ANNUAL TO DATE
OVER TIME
OVER TIME YTD
BONUS/COMMISSION/TIPS
CHILD SUPPORT
DIVIDENDS, INTEREST, ROYALTIES, TRUSTS.
ACTUAL OR IMPUTED INCOME FROM LIQUID
FAMILY ASSETS.
NET RENTAL INCOME
PENSION,SOCIAL SECURITY BENEFITS
VA COMPENSATION
UNEMPLOYMENT
PUBLIC ASSISTANCE
PROJECTED RAISE (HOURLY)
PROJECTED RAISE (ANNUALLY)
OTHER
TOTAL MONTHLY INCOME
TOTAL MONTHLY HOUSEHOLD INCOME
TOTAL ANNUAL HOUSEHOLD INCOME
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
40.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
40.00
1.00
11.75
0.00
1.00
0.00
19.50
19.50
0.00
7.00
1.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
5,626.59
$67,519.06
0.00

• Any NIFA program can currently be used with any government mortgage products
– Federal Housing Administration (FHA)
– Veterans Administration (VA)
– USDA/Rural Development (RD
• Interest rates dictated by the NIFA program

•
•
•
•
•
•

• Lower interest rate with 1% origination fee and .75% discount point

• Par rate - no origination fee or discount points
• Introduced in Fall, 2005
• NIFA’s most popular interest rate program

• Lower interest rate
• Par rate - no origination fee or discount points
• Non first-time homebuyer
• Higher income limits
• Higher purchase price limits

• Some first-time buyers do not have the resources to cover down payment and closing costs (FHA requires a 3.5% down payment)
• ABC is designed to advance a portion of the federal tax credit at closing to be used as down payment and closing cost assistance
• Buyer must contribute a minimum investment
• Use the refund of the federal tax credit to payoff the second mortgage loan after closing

• In November 2009, the government extended the $8,000 First-Time Homebuyer Tax Credit
• Expanded the guidelines to include longterm residents being eligible for a $6,500 credit to purchase a home (for ABC loans, must purchase in a target area)
• Purchase agreements must be executed by
April 30, 2010 and loans must close by
June 30, 2010.

• NIFA provides a fixed-rate first mortgage loan
• NIFA provides a second mortgage loan to be used for a portion of down payment and/or closing cost assistance
• Buyer must have a minimum investment of $1,000
• All borrowers on the loan must complete a homebuyer education class prior to closing
• Buyer must claim the federal tax credit on either their 2009 federal tax return or amend their 2009 return if the loan closing occurs after filing
• If the second mortgage loan is paid in full within
180 days of closing, NIFA will send the borrower an incentive check in the amount of $500

• Borrower executes a second promissory note and second deed of trust
• Second loan bears an interest rate equal to the first loan rate plus 2%
• Term of the second is 10 years
• Borrower makes payments on second loan immediately after closing (not deferred)
• Second payment must be included in loan underwriting debt ratios
• Maximum second amount is the lesser of 10% of purchase price or 85% of the expected tax credit (not to exceed $6,800)
• If the second loan is paid in full within 180 days of closing, the borrower will receive an incentive check from NIFA in the amount of $500

Non-Satisfaction of ABC Second Mortgage Loan
• If buyer elects to not pay the second mortgage loan in full within 180 days of closing, the borrower will not receive the
$500 refund from NIFA.
• Buyer will continue to make monthly payments on both the first and second mortgage loans
• Interest will accrue for the remaining term of the loan (2% higher than the first loan rate)
• NIFA will not subordinate our second deed of trust

Contract Sales Price
Settlement Charges
Gross Amount Due From Borrower
Earnest Deposit
Principal Amount of New Loan
Prorated Property Taxes
Total Paid By/For Borrower
Gross Amount Due From Borrower
Less Amounts Paid By/For Borrower
Remaining Amount Due = 2 nd Mortgage Amount
$100,000
$ 4,600
$104,600
$ 1,000
$ 98,200
$ 500
$ 99,700
$104,600
$ 99,700
$ 4,900

• All ABC loans must have a minimum buyer investment of $1,000
• Sources eligible for the minimum investment include: 1) application deposit, 2) earnest deposit,
3) loan costs paid outside of closing (must be shown on HUD-1 statement) and 4) gift funds
• Buyer can only receive cash back at closing if more than $1,000 is invested upfront
• Prorated taxes must be used to lower the first or second mortgage amounts

• NIFA will require all borrowers on the loan to complete a homebuyer education class prior to closing
• We strongly encourage borrowers to attend a REACH approved class that is available through a network of nonprofits
• List of non-profits is available at www.housingdevelopers.org
or by calling the REACH office at (888) 879-3403
• NIFA will allow borrowers to complete an internet based class using one of our mortgage insurance company partner’s web site (Genworth, MGIC or RMIC)
• Borrower(s) must provide a completion certificate at (or before) loan closing

Filing of 2009 Federal Tax Return
• Buyer will be required to claim the tax credit on their 2009 federal tax return or to amend their 2009 return if closing occurs after filing
• To claim the federal tax credit, IRS Form 5405 must be included with the return
• Buyer must also include a copy of their settlement statement with the tax return and Form 5405
• Buyer is responsible for filing their return in a timely manner in order to receive the refund within
180 days of closing

• In addition to other allowable closing costs, lenders will collect an administrative fee of
$175 for each loan
• Fee can be paid by either the buyer or seller
• US Bank Home Mortgage (NIFA’s Master
Servicer) will retain the fee for the set-up of the second mortgage, collection of monthly payments, payoff quotes and mortgage releases
**Refer to the Allowable Closing Costs & Fees chart (revised 06/09)

Affordable Housing Program (AHP) Grant Funds
• In September 2008, NIFA announced funding for down payment and closing cost assistance is available through the Affordable Housing Program
• NIFA received approval from the Federal Home
Loan Bank to allow two options with utilizing the grant funds:
1) Lender reserves the loan using any of NIFA’s loan programs or
2) Lender provides the funding for first mortgage loan
• These two options should give the buyer the best opportunity for using the grant funds with the lowest interest rate possible

• $3,000 maximum grant amount per unit
• 150 total target-marketed units may receive grant funds
• Borrowers must be first-time homebuyers
• Total household income cannot exceed
50% of the average median income (AMI) based on NIFA’s MRB Program limits
• Eligible properties include single family units, 2-4 units and eligible condominiums

Affordable Housing Program (AHP) Grant Funds
• All properties must be owner-occupied
• Borrower minimum contribution of $500
• Maximum front-end debt ratio of 33%
(housing expense ratio)
• All borrowers must complete a REACH homebuyer education class prior to submission of the pre-closing package
• No matter what option is used, NIFA must do a full compliance review to comply with the AHP program guidelines

Targeted Guidelines for AHP Grant Funds
• Rural areas: A total of 120 units
(loans)
• Urban Areas: A total of 30 units
(loans) in Douglas, Lancaster and
Sarpy Counties
• Rehabilitation: All of the Urban area units (loans) must receive a minimum of $500 worth of qualifying renovation/rehabilitation

Targeted Guidelines for AHP Grant Funds
• Three or More Bedrooms: a total of
75 units (loans) must be made for properties with 3 or more bedrooms
• Special Needs: A total of 45 units
(loans) must be made to elderly borrowers at the age of 55 or older or to borrowers that have a mental or physical disability

• Nonrefundable, federal tax credit that provides financial assistance to qualified buyers
• Homeowner holding MCC receives an annual federal tax credit equal to percentage of interest paid on loan (20%)
• Dollar-for-dollar reduction of federal tax liability
• Amount of MCC tax credit reduces amount of interest deduction claimed on tax return

• Generally, MCC rules same as MRB program requirements
• Must be a first-time buyer except for target area purchases
• NIFA maximum income and purchase price limits apply
• Must be owner-occupied
• Recapture tax requirement

• NIFA has established a credit rate of 20% for the program
• Maximum federal tax credit is $2,000 annual
• Tax credit can be carried forward by borrower for up to 3 years
• Mortgage interest reduction is reduced by amount of tax credit
• Cannot obtain MCC and mortgage loan financed by
NIFA’s MRB program
• Originating lender provides financing on the first mortgage loan and sets the rate

Mortgage Loan Transaction
Loan Amount
Interest Rate (30-year term)
$160,000
5%
First Mortgage Interest (12 months)
MCC – 20% of mortgage interest
$7,946.39
$1,589.28
Remaining Interest Deduction $6,357.11
Borrower Information (married couple, no dependents)
Adjusted Gross Income $60,000
Standard Deduction
Taxable Income
Federal Tax Liability (tax table)
MCC Deduction
Remaining Tax Liability
$10,900
$49,100
$6,559.00
$1,589.28
$4,969.72

• NIFA obtains the funds for mortgage programs from the sale of tax-exempt
Mortgage Revenue Bonds (MRB)
• Effective January 1, 1991, the IRS stipulated that all loans closed with proceeds from MRB’s may be subject to a recapture tax
• Based on income, family size and net gain realized on the sale of the home

• Federal income tax may be due when home is sold
• All 3 of these events must occur:
– Home is sold within first nine years and
– Homeowner realizes a gain on the sale (as defined by the IRS) and
– Homeowner’s income has increased and exceeds the limits established by the IRS
• NOT collected at time of sale but when taxes are prepared for the year the sale occurred

• Some are more likely to pay a
Recapture Tax than others:
– Those who are employed in a high-growth income potential position
– Those who were close to the maximum income limit at time of closing
– Those in a high inflation environment
– Those who were single at time of purchase and are married at time of sale

• Recapture Tax will not be owed if:
– The home is transferred to a spouse, or former spouse, in connection with a divorce
– The home is destroyed by a casualty and it is repaired or replaced on the original site within 2 years
– The home is disposed of as a result of the homeowner’s death

• IRS Form 8828 must be completed & filed with the Federal Tax Return the for year the home is sold.
• Homeowners should refer to their final recapture tax disclosure notice (Form
D) signed at closing.
– If a copy is needed, they should contact their servicing lender

HOME SOLD
DURING
YEAR*
(Column 1)
Income Tables by Geographic Area
LINCOLN MSA (Lancaster County)
HOLDING
PERIOD %
NON-TARGETED AREA
Adjusted Qualifying Income
Number of Family Members
Living in Your Home at the Time of Sale
7
8
5
6
9
3
4
1
2
100%
80%
60%
40%
20%
20%
40%
60%
80%
2 or less
$64,300
$67,515
$70,890
$74,435
$78,157
$82,064
$86,168
$90,476
$95,000
3 or more
$73,945
$77,642
$81,524
$85,600
$89,880
$94,374
$99,093
$104,048
$109,250
2 or less
$77,160
$81,018
$85,068
$89,322
$93,788
$98,477
$103,402
$108,571
$114,000
(Column 2)
TARGETED AREA
Adjusted Qualifying Income
Number of Family Members
Living in Your Home at the Time of Sale
3 or more
$90,020
$94,521
$99,247
$104,209
$109,420
$114,890
$120,635
$126,667
$133,000

Recapture Tax Reimbursement
• New reimbursement policy effective for
MRB loans closed 6-1-04 or later
• NIFA will reimburse the recapture tax to any qualified homeowner affected
• Borrower responsible for submitting reimbursement request to NIFA by the required date of July 15 th .

Recapture Tax Reimbursement
• NIFA will not calculate the amount of the recapture tax owed
• NIFA loan must be active at the time of sale
– (i.e. NIFA will not reimburse if the mortgage loan has been refinanced.)
• Reimbursement from NIFA limited to the actual amount of the recapture tax.

Jacki Young, Single Family Program Manager
Phone number: (402) 434-3915
Email: jacki.young@nifa.org
Cindy Trautman, Assistant Program Manager
Phone number: (402) 441-4643
Email: cindy.trautman@nifa.org
Website: www.nifa.org