Mo. enhances federal tax credit with advance payment plan

It is designed to assist homebuyers who cannot produce a down payment.

By Victoria Guida

Published Feb. 2, 2009

The Missouri Housing Development Commission is offering an advance payment to first-time homebuyers who qualify for the $7,500 federal tax credit.

In order to qualify for the $6,750 advance, households must have an income of less than $85,000 before taxes and be eligible for home loans. After receiving their tax refunds, homebuyers are required to pay back the commission on time. Otherwise, it must be paid back with interest over a 10-year period.

"Congress created this tax credit and we felt like it wasn't as helpful as it could be for possible homeowners," said Kathryn Watts, Missouri Housing Development Commission government affairs liaison.

Watts said a major barrier to purchasing a home is producing the down payment. The tax credit approved by Congress was designed to assist homebuyers with this obstacle, but Watts said the credit would not help them immediately.

"The tax credit goes through the income tax mechanism and people wouldn't be able to get it immediately and we thought, 'Wouldn't it be great if we could just bridge that gap of time?'" she said.

The MHDC created a special task force of realtors, bankers and other people involved with family homeownership to help put this plan into action in Congress.

"It's currently set to expire at June, which isn't a long window, but they are considering extending the tax credit in the stimulus bill, so that more people could use it," Watts said.

MU Finance Professor Robert Weagley said if the government is offering an advance payment on a home during an economic slump, homeownership is a good idea for people to consider.

"The state of Missouri has been pretty resilient throughout this whole thing and our market is not prone to the excesses nor the deep entrenchments that other states seemed to have experienced," he said.

Weagley also stressed the importance of homeownership. He said it is an initial step for someone to become financially established and also makes a "better community."

"I'm a big advocate of homeownership, for psychological reasons as well as financial, from dealing with neighbors to taking care of their property," Weagley said. "Homeowners are even more likely to vote."