MORTGAGE CREDIT CERTIFICATE PROGRAM

The Arkansas Development Finance Authority (ADFA) recently introduced a program that offers a Federal Tax Credit for First-Time-Homebuyers.
It is called the Mortgage Credit Certificate (MCC) Program. The MCC Program is offered by the Internal Revenue Service to encourage borrowers to buy their first home.

For borrowers that qualify, if offers them up to a $2,000 Federal tax credit for each year that the house they are buying is used as their principal residence. To qualify borrowers must be first-time-homebuyers, except in targeted counties; must meet household income limits, which vary by county; and not exceed a purchase price of $225,000. The MCC is not part of the home financing, but rather an incentive the IRS offers to get first-time-homebuyers to buy a home.

“This is a new program that Realtors and lenders are just finding out is available in Arkansas,” said Single Family Housing Manager Murray Harding. “We expect demand for MCC’s to be greater than availability so awards will be made on a first come, first served basis.”

To be eligible for the MCC, a borrower’s mortgage loan must be a 30 or 15-year fixed-rate mortgage and can’t be used in conjunction with a mortgage revenue bond loan. The IRS considers both programs to be “mortgage subsidies” and to do both would be considered “double dipping”.

The specific benefit to a borrower is calculated by taking the amount of interest paid each year on a mortgage loan and multiplying it by 25%. The borrower can take immediate advantage of the MCC benefit by going to their employer and adjusting their W-4 to reflect the anticipated amount of credit. That will lower the borrower’s Federal tax withholdings and increase a new homebuyers monthly take home pay.

The MCC Program provides the greatest benefits to a borrower that has Federal tax liability; however, because the MCC can provide a benefit for the life of the mortgage loan, a borrower may not have a Federal tax liability initially but may have such a liability in the future.

The MCC Program is accessed through one of ADFA’s MCC Participating Lenders.

Contact us to find out who these lenders are!
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Jefferson County Income Limits
1-2 Member Household $58,920
3- Member Household $68,740

Why Home Inspections?

Personally, I would never buy a home without an inspection. In fact, I may even go a little overboard. When I purchased my home, which was new construction, I not only had it inspected throughout the construction process, but I also had it inspected about a month before the full warranty was up so I could have repairs done. Of course, that’s just me. Since then, I’ve watched (somewhat in horror) as someone close to me purchased a home without an inspection and seen how it can go terribly, terribly wrong. This is a true story…
Pam and Bill (names changed) were looking for their first home in the rural Midwest. Like most first-time homebuyers, they were very excited, nervous, and also wanted to stretch their home buying dollars as far as they could go. They got preapproved for a mortgage, hired a buyer’s agent (not an EBA), and went house hunting. Within a few weeks, they found a house in their desired location at a price they could afford. They went to look at it and made an offer. The house was in foreclosure but after a little negotiation with the bank, they settled on a price of $65,000 – right in the price range Pam and Bill had set for themselves and while not a steal, a fair price for that neighborhood.
Knowing Pam very well, I was informed throughout the process even though I live nearly 2,000 miles away. When we discussed an inspection, she stated that the inspection was going to cost $350 and that with all the money they had to spend on the down payment and closing costs, she didn’t really feel the extra $350 was warranted or feasible. I’m sure red flags are going up in the heads of any real estate professionals! They’re buying a foreclosed home “as-is” without an inspection.
Fast forward to the first thunderstorm after closing. Pam and Bill are getting drenched…in their bedroom…in their bed. The roof has a serious leak. Bill and his dad put some tarps over the roof to temporarily keep out the rain and call a roofing contractor to assess the damage and give them an estimate on the repairs.
The roofing contractor comes. The roof needs replaced, but that’s not the bad news. The bad news is that there is an active hornets’ nest in the roof and he can’t replace the roof until the nest is removed.
Now, the exterminator comes. This is a big, very active nest and it is mid-summer, when hornets are most active. There is no way for him to remove it all until they go dormant in the winter. Great. At least four months with a very leaky roof and huge, active hornets’ nest. Not exactly their dream home.
Fortunately, winter came a little early. About three months later, the exterminator returned and got rid of the nest. Then, the roofer came and they got a new roof. At what cost? $14,000. Over 20% of what they paid for the entire house! If they thought $350 was expensive, I can’t imagine what they thought about $14,000.
Lesson learned. With an inspection, it is highly probable that they would have known about the leaky roof and the hornets’ nest. I’m not sure what options they would have had at that point but I can think of at least two: they could have bought a different home or if they were really set on that house, they could have negotiated a lower price to help them cover the huge repair bills.
-Kimberly Kahl, CAE
NAEBA Executive Director

Arkansas law provides rights to both residential tenants and landlords. Arkansas laws on such issues apply only to private rental units and not government-subsidized housing.

Tenant Rights and Obligations

Landlords must provide notice of at least one rental period before raising the rent. This rule applies to both oral and written leases.
If you plan to sublease your apartment or house, you typically must obtain prior approval from the landlord, and obtain written direction from him or her stating the amount of rent that can be collected.
If you plan to move and have a written lease agreement, you must give notice according to the provisions of your lease.
If you plan to move out and have an oral lease agreement, you must give one rental period’s notice.

Landlord Rights

In Arkansas, a landlord may give notice of lease termination for any reason. Even model tenants may be subject to having a lease terminated. The landlord must give one rental period’s notice for an oral lease, or provide notice according to the terms of a written lease.
State law provides that upon the voluntary or involuntary termination of any lease agreement, all property left in the dwelling by the tenant will be considered abandoned and may be disposed of by the landlord as the landlord sees fit without recourse by the tenant. All property left on the premises by the tenant is subjected to a lien in favor of the landlord for the payment of all sums agreed to be paid by the tenant.

Repair and Maintenance of a Rental Dwelling

When you rent a house or apartment, you usually agree to take it “as is.” This means that the landlord is not required to provide additional maintenance to the dwelling. There are, however, city building codes to protect your health and safety. If you have health or safety problems with your dwelling, contact the city to find out if the residence fully complies with housing codes.
If your landlord promises to make repairs, make sure that promise is in the written lease.
Even if a landlord does not make a promised repair, the tenant should continue to pay the rent. Tenants have some recourse, such as going to small claims court, renegotiating lease agreement terms, moving, or seeking the advice of a private attorney.
Should you feel that your living conditions are an immediate health risk, you may contact the health inspector in your locality.

Security Deposits

Arkansas’ security-deposit law provides tenants with added protection. This law applies only to landlords who rent six or more dwellings. It contains the following provisions:

If you are required to pay a security deposit, you cannot be charged in excess of two months’ rent. For example, if your rent is $500 a month, a landlord cannot require a security deposit of more than $1,000.
When you move, the landlord must return your security deposit within 60 days. The landlord may, however, deduct from the security deposit the cost to repair any damages made to the dwelling or any past-due rent.
If the landlord deducts from your security deposit, the landlord must give you a written, itemized list of the charges withheld within 60 days of the time you vacate.
A landlord may withhold the entire amount of the security deposit if damages or unpaid rent exceed the amount of the security deposit.

Evictions

Failure to pay rent or to pay rent on time, for any reason, is grounds for eviction. There are two types of eviction procedures a landlord can use: “unlawful detainer” (a civil eviction) and “failure to vacate” (a criminal eviction).
Unlawful : If a landlord uses the “unlawful detainer” method of eviction, he must give you three days’ written notice to vacate. If you do not leave, the landlord can sue by filing a complaint against you in court. After you receive a summons to appear in court, you have five days to object in writing to the eviction. Any objection must be filed with the clerk of the court in which the eviction action was filed, and you should send a copy of your objection to the landlord’s lawyer. If you do not file an objection, you can be removed from the dwelling by the county sheriff. If you do object, a hearing will be scheduled to determine the outcome to your case.
Failure to Vacate: If a landlord wishes to use the “failure to vacate” method of eviction, he must give you 10days written notice. This method of eviction applies only to non-payment of rent. If you do not leave the premises within 10 days, the prosecuting attorney has the discretion to charge you with a misdemeanor. You would then be required to appear in court where you could be fined up to $25 for each day you remained in the dwelling after being given the 10-day notice to vacate.

Discrimination

A federal housing law protects tenants from unlawful discrimination in the sale or rental of residential property. The Fair Housing Act prohibits discrimination in most residential real estate-related transactions. The law includes the following provisions:

Bans residential discrimination based on race, color, religion, gender, handicap, familial status or national origin.
Bars advertisements and publications that suggest any preference, limitation, or discrimination (e.g., adults only in a particular complex or section).
Prohibits discrimination in the terms or conditions of the sale or rent of a dwelling
Bans discriminating against any person because of race, color, religion, gender, handicap, familial status or national origin in the use of facilities associated with the dwelling.
Forbids discriminatory assignment of a person to a particular section of a complex or to a particular floor of a building.
For more information about Fair Housing, you may contact HUD at www.hud.gov or the Arkansas Fair Housing Commission at www.fairhousing.arkansas.gov.

Tips

Always read the lease agreement before signing and keep a copy for your files.
Both oral and written lease agreements are binding. However, it is better to have a written agreement so there are no misunderstandings about each party’s responsibilities.
Always pay your rent on time.

2011-Market-Report

Click the link above to discover how the market faired in White Hall, Redfield, Pine Bluff and Watson Chapel, AR in 2011 – From the # of homes sold to the average days on the market. Any questions?
Please contact us – info@tpsarkansas.com or visit our website http://tpsarkansas.com for all of your real estate answers!

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