3-2-07
TaxSmart
As I said last month, it’s a good time to be a first-time homebuyer in the city of Chicago!
In my last article, I introduced you to the City Mortgage program, which provides first-time homebuyers with money to cover down payment and closing costs. (By the way, if you missed that article, you can find it here.) Another terrific program is TaxSmart, which entitles first-time homebuyers to a federal income tax credit. It’s an impressive money-saving opportunity if you’re looking to buy in the city.
TaxSmart is a Mortgage Credit Certificate (MCC) program which entitles first-time home buyers to a federal income tax credit. A tax credit is a direct reduction of taxes due. Under the program, a homebuyer would receive an MCC to reduce income taxes by an amount equal to 20 percent of the interest paid on a mortgage. For example, let’s say over the course of the year, you pay $10,000 in mortgage interest. You would then be eligible to claim a tax credit of $2,000, thanks to TaxSmart.
But that’s not even the best part! As Marti Wiles, Assistant Commissioner of the Department of Housing, adds, “TaxSmart is a great way for people to save money here in the City of Chicago and the best part is that it’s available for as long as you have the loan!” Yes, for any home financed under TaxSmart, that tax credit is available every year you continue to live there, so if you plan to stay in the property long-term, TaxSmart can really save you a lot of money.
So how does TaxSmart work? Do you qualify? If so, how do you get started?
Can anyone participate in TaxSmart?
The program is open to people who are buying for the first time, or who have not owned a home in the past three years or who purchase homes in target neighborhoods. So you might qualify even if you have owned a home in the past!
Like all city housing programs, TaxSmart has specific eligibility guidelines for income and purchase prices. Income limits in many areas of the city range from $60,000 per year for a single person to $80,000 for a family of three or more. In target areas, the limits are higher, ranging from $72,000 to $105,000 per year. “Target areas” are those defined by the U.S. Census bureau as revitalizing low- and moderate-income neighborhoods. You can find a map of target areas at www.cityofchicago.org/housing; scroll down the left hand side and click on “Learn About TaxSmart” to arrive at the TaxSmart information page. You’ll find a PDF of the target area map at the bottom of that page. Target areas in Chicago include many neighborhoods you’re probably already familiar with, if not living in right now, such as Logan Square, Uptown and even parts of Lincoln Park.
Does TaxSmart work for any home purchase?
There is a price limit for the program but it should be well within the price range any of us would be considering. To qualify for TaxSmart, the property must have a purchase price of less than $325,000 for a new or rehabbed home or $514,000 for a four flat. In target areas, purchase price limits are $398,000 and $628,000, respectively.
So how do I get started with TaxSmart?
Meet with a participating mortgage lender. It’s important to note that TaxSmart is only available through participating mortgage lenders; you can find a list of participating lenders on the TaxSmart info page at www.cityofchicago.org/housing. Also, I have a couple of participating lenders I recommend that are very, very good and are well-versed in TaxSmart and Chicago’s other first-time homebuyer programs; feel free to call or e-mail me anytime for their info.
Receive pre-purchase counseling. All city programs require pre-purchase counseling. This educational requirement will generally consist of a meeting with a homeownership counselor followed by a two-hour seminar provided by any of several Homeownership Housing Counseling Centers throughout the city. Pre-purchase counseling will provide valuable information on all aspects of buying and owning a home.
Find a home. Once you have been pre-qualified by a participating mortgage lender and have completed the pre-purchase counseling component, it’s business as usual! Meet with a realtor, find a property that will make you happy, settle on a price with the seller and close on the property. You can find much more information about these aspects of the home buying process in some of my past articles, which are available online at www.performink.com. I am also happy to refer you to an outstanding realtor, real estate attorney and home inspector.
Can I combine TaxSmart and City Mortgage?
It’s a good thought, but no, it’s one or the other. If you’re in need of help with your down payment or closing costs, then City Mortgage is the better fit. However, if you think you’re going to be staying in this home for several, if not many, years to come, then TaxSmart might save you more money in the long term. As always, if you have any questions or comments, give me a buzz or drop me a line and we’ll figure it out!
I hope this article leads to some new additions to the program’s long list of success stories! By the way, it’s that time of year again… time for The Chicago Artists Housing Expo! A one-day event solely dedicated to assisting actors and artists in their quest to become happy homeowners! I’ll tell you all about it next month!
Mike McNamara has been an actor in Chicago for the past nine years in theatre, commercials, television and film. Mike is also a Mortgage Consultant with West America Mortgage Company. He can be reached anytime at 773/398-0021 or McNamara310@aol.com.