Steamboat Springs The Routt County Commission voted unanimously Monday to spend up to $4,500 in outside legal fees to get access to federal tax credits that could help first-time home buyers in Routt County.
The county will ask for $3 million in available tax credits from the Colorado Private Activity Bond Allocation Committee.
County Attorney John Merrill told the commissioners Routt County will likely be in competition with other mountain communities for a share of the tax credit pool allocated to Colorado.
If the tax credits for Routt County are approved, private housing lenders here would be able to use them to qualify home buyers who might not otherwise be approved for mortgages. Also, their resulting mortgage payments would essentially be reduced, Jeff Chapman told the commissioners. He is a housing lender working for Home Buyers Mortgage. Chapman is also a member of the Regional Affordable Living Foundation board.
"We're closing loans where people have debt to income ratios of 60 to 65 percent," Chapman told the commissioners. "What the program does is reduce those monthly payments."
Routt County's investment in applying for the credits will initially cover $2,000 in legal work to make the application. The balance of $2,500 won't be spent unless the credits are granted. The money will come from a professional services line item in Merrill's existing budget and will go to the Denver law firm of Becker, Stowe and Bieber, which specializes in this type of work.
Outgoing Commissioner Ben Beall pointed out the $4,500 committed by the county is separate from the $35,000 the county will spend to support RALF this year.
The credits are not a loan, Merrill was careful to point out. Instead, the government issues bonds to back up the tax credits. If they are granted, they will allow mortgage lenders to submit their client's candidacy for the credits. The Colorado Housing Finance Authority will administer the program, Chapman said. Homeowners will be issued certificates that allow them to take a credit off their taxes.
Merrill pointed out the credits are more powerful than deductions for interest payments, which come off gross income rather than off the actual amount of taxes (the credits are not in place in interest deductions).
Chapman said the household income thresholds for families wishing to participate in Routt County are due to be recalculated. However, the current statewide threshold for households of two people is $54,900. Chapman emphasized the tax credits would be available only to first-time home buyers.
Chapman said a family borrowing $150,000 at 7.25 percent could look forward to a year-end tax credit that could equate to about a $181 monthly reduction in mortgage payments.
"It's significant," Chapman said. He predicted the tax credits could become a factor for home buyers interested in the Mountain Vista apartments being remodeled by RALF. "West End Village would also be a good candidate" for home buyers interested in tapping into the tax credits, Chapman said.
The actual mortgage payments would not be reduced, and it would be up to the homeowners to use the proceeds of the tax credit wisely.
Chapman said depending upon the lender, some might actually compute the tax credit into calculations that determine the size of the loan a family could qualify for.
Although all lenders have access to the credits, Chapman said, they must agree to go through CHFA training that qualifies them to advise people about the credits. So far, a majority of local mortgage lenders have expressed a willingness to take part, he added.