Maine residents hoping to purchase their first home soon could have two additional tools to help them cover the steep upfront costs.
On Thursday, the Maine State Housing Authority announced a new program offering grants of up to $5,000 for first-time homebuyers to use toward the down payment or post-closing costs. Eligible homeowners also can receive a $500 coupon for a home energy audit.
Earlier this month, the Legislature passed, and Gov. John Baldacci signed, a bill that could allow first-time homebuyers to apply an $8,000 federal tax credit toward the down payment on a house. Right now, homebuyers who purchase a property in 2009 must wait until they file their income taxes next year to claim the credit.
State officials are awaiting approval from the Internal Revenue Service for the alternative use of the tax credit.
But even if the IRS grants its approval, it will be an either-or proposition for homebuyers hoping to use the money for a down payment on a home.
Dan Simpson, manager of public information for MSHA, said the new Gift of Green program aims to encourage new homeowners to use their $8,000 federal tax credit to invest in energy efficiency. For that reason and Federal Housing Authority restrictions, the program cannot be combined with the down payment proposal spearheaded by Rep. Richard Cleary, D-Houlton.
Cleary said he agreed to sponsor the bill enabling use of the $8,000 tax credit for a down payment after hearing from several constituents. The bill won unanimous support in the House, passed without debate in the Senate and was signed into law by Baldacci earlier this week.
“The federal home buyers tax credit is great but you can only get it after you buy the home,” Cleary said recently. “So it’s great to buy furniture with, but it doesn’t help with the down payment.”
Rep. Elsie Flemings, D-Bar Harbor, pointed out that the federal tax credit is set to expire on Nov. 30. She and Cleary see the bill as another form of economic stimulus not to mention a way to help put more people into their first homes.
“It helps the economy, it helps the real estate industry, and it helps the homeowners,” said Flemings, who helped shepherd the bill through the Legislature.
The provisions of the bill would take effect only after the Internal Revenue Service permits the transfer of tax credit money to a financial institution or another third party.
The new State Housing Authority program announced Thursday would offer qualified first-time homeowners a grant of up to $5,000 for use toward a down payment or other closing costs. The grant cannot exceed 4 percent of the total mortgage amount, and homebuyers must pay at least 1 percent of the loan amount from their personal resources to be eligible.
A part of State Housing’s First Home Program, the Gift of Green initiative was designed to piggyback on the $8,000 federal tax credit.
Homeowners who invest in energy efficiency improvements also may be eligible for an additional $1,500 federal tax credit, which when combined with the $500 coupon from MSHA could bring the total package up to $15,000.
No state or federal tax revenue will be used for the Gift of Green program. Instead, MSHA sells mortgage revenue bonds to private investors to help make mortgages more affordable for first-time homebuyers. The new program has the support of the Maine Association of Realtors, the Maine Association of Community Banks and the Maine Credit Union League.
“This combination of state and federal assistance should encourage many more Maine families to take that step to become homeowners,” Baldacci said in a statement. “The Gift of Green invests in Maine people and in Maine’s housing market.”
A list of income limitations and home price limits, as well as participating lenders, is available at www.mainehousing.org.