Is TSAHC DPA and MCC worth it for investing?

Question

I saw a couple other posts about these programs on bigger pockets, but I still had some questions.

In the Dallas area the income limits are 64.2k for the Mortage Credit Certificate and Down Payment Assistance combo which I currently qualify for. The MCC effectively lets you save the 2,000 every year as a tax credit, which partially offsets the higher interest rate of the DPA program.

As of late 2019, they changed it so that you can only pair the DPA with a governmental style loan unfortunately, so PMI might also suck. My initial thoughts are that this would be a great program to use if I wanted to househack a SFH that I also wanted to live in for over 3 years.

My questions are:

1. Does anybody else have experience with using this program as a beginner investor tool?

2. Were there any implications if you wanted to refinance? Was this considered a sale that would trigger potential tax recaptures? It seems like this would work best after the 3 year period if so.

3. From my conversations with a lender, it seems like I am in the clear after the 3 year period for payback of the DPA grant, and MCC is not tested again after closing, so as long as I live in the property I can keep using the 2,000 tax credit.

Andrew Postell · Answer

@David Y Mei thanks for posting here. Who told you that TSAHC is only for government loans? To me, governtment = FHA/VA/USDA. Fannie Mae and Freddie Mac I would call conventional loans. And TSAHC absolutely can be used on Fannie/Freddie loans.

Now, TSAHC is not really designed to be an investor tool. Mainly because it's designed for your primary home. So if I'm trying to use the BRRRR method to limit my out of pocket costs....well, that's not necessary here because my out of pocket costs are lower from the program. Alternatively, using BRRRR I can say that I'm only going to buy a property worth $100k for $75k. But with when buying a primary home, I'm buying a $100k home for $100k. So the philosophy behind buying a primary home vs. investment properties is different. Not to say you can't use the property for an investment property later but it's designed to help you buy a primary home with as little out of pocket as possible.

If you refinance using the "2nd lien" option (which is the Fannie/Freddie route) then you owe the 2nd lien in full. The government loan grant is not repayable.

Hope this helps!

David Y M. · Answer

@Andrew Postell Thanks Andrew for your insight! I will call up my lender tomorrow for clarification and see what rates I can get officially quoted for. I definitely want to do conventional if I can due to the lower closing costs and PMI.

I will most likely rent out one room to cut down on expenses. From what I have been told this is allowed.

I'm not sure if anything I'm currently looking at for as a primary residence will cash flow at this moment.... but at least I won't be renting.

Is TSAHC DPA and MCC worth it for investing?

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