Sound Mortgage Planning Blog

My weekend consisted of freezing cold winds while putting up lights, darn near pealing my finger nail completley off while trying to open the ornaments tote and finally burning my hand while barbecuing vegetables for a salad. As far as weekends go, not my best...yet, I live! I've survived the weekend and I am now ready to take on the world! Well, not quite the world but I will certainly give the South Puget Sound a go.

Last Friday, before the dreaded weekend, I was in Seattle taking the Washington State Housing Finance Commission's House Key class. This is required for any Loan Officer wanting to originate this type of loan and any Loan Officer and/or Real Estate Agent who wants to teach the first-time homebuyer class that all first-time homebuyers using the House Key Bond program must attend.

Let me say, Lisa, Bill and Karen are fantastic trainers and I came away from the class knowing more than I had ever thought I would.

One of the biggest take-aways I got was regarding the Recapture Tax. I had been speking with an agent the day before and they had brought this very thing up. They were concerned about the recapture tax and that it was a deterrent for the homebuyer. Let me say now, this should not be a concern at all.

Let me first quote one of the instructors as saying, "Recapture is a perceived barrier to the program that never really happens." Why?

"The recapture tax is assessed only under the following circumstances:

• The home is sold or otherwise disposed of during the first nine years of ownership;
• The Borrower's income increases each year by 5 percent above the maximum federal income limit at the time of purchase; and
• The Borrower realizes a gain upon the sale of the home.

Because all these events must occur for any tax to be paid, it is unlikely that most Borrowers will pay a recapture tax.

In the event that a recapture tax is due, it will be only a portion of the Borrower's gain on the sale of the home. The law states that the maximum recapture tax is either 50% of the gain on the sale or 6.25% of the original loan amount, whichever is less." Source: House Key Program Manual, RECAPTURE TAX 5.1 (Rev. 06/01/99)

So now I begin the process of putting my class together and finding a local agent that would like to team up and provide first-time homebuyer education classes. I am excited to begin doing this and who knows, I may see you in one of my classes!