To provide the lowest possible interest rate to First-time Homebuyers, SDHDA finances the First-time Homebuyer Program using funds from the sale of tax-exempt Mortgage Revenue Bonds (MRBs).

 

These funds are federally regulated, and borrowers who buy their homes using the First-time Homebuyer Program may be subject to a Recapture Tax.

 

Recapture Tax regulations require some borrowers to repay the government a portion of their gain on the sale of their home, depending on (1) whether there is a gain on the sale, (2) the household income at the time of sale, and (3) if the sale occurs within nine years of buying the home. Recapture Tax is paid directly to the IRS when filing taxes for the year in which the home is sold.

 

Nothing in the Recapture Tax provisions should prevent the use of SDHDA's First-time Homebuyer Program.  Using the Program may enable you to afford the home of your dreams.

 

The financial benefits of homeownership, including deductions for mortgage interest payments and taxes, the low interest rate and other Program benefits may outweigh the possibility that you may have to pay a Recapture Tax in the future.