Homebuilders, buyers get boost up ladder

New Mexico Business Journal, Feb, 1994

HOMEBUILDERS AND home buyers are getting a boost up the housing ladder with an innovative new program aimed at giving money back to first-time purchasers throughout New Mexico.

An estimated 2,000 eligible first-time home buyers could benefit from the Taxpayer's Assistance Program through the New Mexico Mortgage Finance Authority. For those in the residential construction industry, it can mean building another 2,000 homes; for the home buyers, it can mean getting back an average of $1,000 a year and an incentive to buy.

The project has the full backing of Gov. Bruce King; David King, chairman of the Mortgage Finance Authority; and Ardy Hafer, president of the Realtors Association of New Mexico.

Others promoting the effort are Alan Fowler, president of the Mortgage Bankers Association; and Jim Folkman, executive director of the Homebuilders Association of Central New Mexico.

TAP, the acronym for the program, offers first-time home buyers throughout the state a rare opportunity to tap into today's low interest rates, and at the same time, decrease the amount of federal taxes they pay.

The estimated 2,000 eligible home buyers with low to moderate incomes will benefit from the new program and at the same time generate $132 million in new home mortgage activity along with boosting the need for more residential construction.

Most home buyers know that in determining the taxes they pay, they can deduct from their income the interest they pay on their home mortgages.

The MFA's new program goes a step further.

TAP enables eligible first-time home buyers to take 20 percent of the interest they pay on their home mortgages as a tax credit. The program lowers participants' federal tax liability.

Program participants will adjust their federal W-4 income-tax-withholding forms so they pay less in taxes throughout the year, resulting in more take-home pay each month for use toward making their monthly mortgage payments. The additional income -- an average of $1,000 a year -- can be used in qualifying the home buyer for a home purchase.

In many cases, the MFA's new program will provide the extra income buyers need to be able to qualify for a home loan.

"I encourage potential first-time home buyers to learn from their Realtors, lenders or the MFA whether they qualify for TAP," says MFA's David King. "The opportunity for this kind of income tax savings doesn't come along very often." "TAP, the MFA's latest program, gives a tremendous boost to tax paying New Mexicans seeking to buy their first home," says Gov. King. "That's good news for every facet of our state's housing industry, and for the state economy considering the additional real estate activity to be generated by the program." "As Realtors, we're dedicated to helping all of New Mexico's working families realize the dream of owning their own home," says Ardy Hafer, president of the Realtors Association of New Mexico and a Realtor in Los Alamos.

APARTMENTS

Average Price - Albuquerque

                           One       Two        Three        Four
           Efficiency    Bedroom   Bedroom     Bedroom      Bedroom

W/O Utilities    $373     $459      $603        $748         $650
With Utilities   $355     $424      $541        $623          NA

Average Price - Statewide

W/O Utilities    $373     $465      $607        $751         $650
With Utilities   $355     $429      $535        $636          NA

* Apartments with utilities tend to be older properties and less expensive.

Apartment Association of New Mexico 3rd Quarter 1993 Occupancy Survey

"We're delighted that MFA has given us another strong tool to use," says Hafer. Many of the benefits of today's low interest rates are being offset by rising home prices throughout New Mexico.

On the surface, today's low interest rates look great, but along with those low rates are significant increases in home prices statewide, often above levels the average family can afford.

The MFA's program allows eligible families to qualify for a higher mortgage in today's competitive low interest rate real estate market despite home price increases.

Through TAP, the MFA will issue mortgage credit certificates to home buyers who then will receive direct tax credits on the federal income taxes they pay. These certificates can be used in conjunction with any market rate mortgage loan offered by participating lenders, except loans originated with tax exempt bonds through the MFA's single family home ownership program.

The MFA's new program is available statewide on a first-come, first-served basis through MFA-participating lenders throughout the state.

Once approved, these certificates will provide first-time home buyers with a direct federal tax credit worth 20 percent of the annual interest paid on a mortgage loan each year for the life of the loan as long as the home buyer remains the principal occupant of the home.

The remaining 80 percent of mortgage interest paid by homeowners will continue to qualify as an itemized deduction taken at the end of the year.