Mortgage program loans based on tax credit

• Advocate business staff
• Published: Nov 26, 2009 - Page: 1B

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The East Baton Rouge Mortgage Finance Authority has adapted its current multimillion-dollar mortgage loan program to help qualified Baton Rouge homebuyers take advantage of federal tax credits extended to mid-2010.

“Many prospective homebuyers meet the income qualifications for the tax credit programs but don’t have cash on hand for a down payment or closing costs,” said Astrid Clements, chairwoman of the East Baton Rouge Mortgage Finance Authority. “Our programs allow such buyers to borrow against their tax credit and use the money for their down payment and/or closing costs.”

The mortgage authority has about $17 million available for loans from the $20 million it began offering East Baton Rouge Parish homebuyers in mid-September, said Vickie Theriot, executive vice president of the mortgage authority.

Theriot said the loan program — expected to finance around 160 mortgages for low- to middle-income homebuyers — came out during a slower time of the year for home sales. Activity should pick up after the new year. Funds should last through June or July, when another loan program could be announced, Theriot said.

The mortgage program also is competing against record low mortgage rates, which mortgage giant Freddie Mac on Wednesday said averaged 4.78 percent this week for 30-year, fixed-rate loans.

“We thought 5.38 was going to be a great rate” for the mortgage loan program, Theriot said.

It still is a good rate for first-time and low-income buyers who might not qualify for lower rates, she said, especially coupled with an ability to tap the federal tax credit in advance for a down payment or closing costs.

Congress recently extended into 2010 a tax credit of up to $8,000 for first-time homebuyers and also created a new tax credit of up to $6,500 for certain non-first-time homebuyers.

Purchase agreements qualifying for the tax credits have to be in place by April 30 and the purchase of the home completed no later than June 30.

The federal extension prompted the mortgage authority to extend its program that allows qualified borrowers to receive the federal tax credit in advance of filing their 2009 tax returns.

The program allows first-time buyers to borrow up to $8,000, which they can repay when they receive the tax credit upon filing their 2009 federal tax returns, or pay it off over 10 years at 6 percent.

Non-first-time homebuyers can obtain a second mortgage from the mortgage authority for 4 percent of the loan amount, up to $6,500. The 10-year second mortgages are offered at 6 percent interest with no prepayment penalty.

The mortgage authority funds 30-year mortgages at competitive interest rates for homes in East Baton Rouge Parish. Exact interest rates can vary between the various programs offered.