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Breaking News: Borrowers With FHA Mortgages Can Use Tax Credit at Closing
Buyers must still contribute 3.5% downpayment.
By: Alison Rice

First-time buyers using FHA financing will be able to use their $8,000 federal housing tax credit at the closing table, rather than waiting for a tax refund, according to an FHA document released today.

The eagerly-awaited “mortgagee letter” spells out the details of the effort, which was first announced two weeks ago by HUD Secretary Shaun Donovan. This morning, Donovan spoke to the NAHB at its spring board meetings on the topic as well.

“This will assist home buyers at closing, but it will particularly benefit home builders across the country,” Donovan said at the NAHB gathering.

Critically for builders, the program will allow all first-time buyers using FHA mortgages to apply their tax credit at settlement, not just FHA borrowers working with a state housing finance agency. (Many such agencies have already established programs that allow borrowers to do just that.)

Lenders, agencies, and others will be allowed to purchase the credit from buyers, who can then use the proceeds for closing costs or to boost their downpayment beyond the 3.5% required for an FHA mortgage. (Buyers cannot use the tax credit as part of that initial 3.5% downpayment.)

Lenders and agencies will then be able to convert the tax credit into a second lien on the property. If a borrower fails to repay the tax-credit advance by the agreed-upon date (i.e., sending a check after their federal tax refund arrives), then the loan will convert to a second mortgage. Lenders and agencies can either require monthly payments on this loan or simply hold it as a “soft” second, receiving the proceeds when the home is next sold.

There are other rules as well. Buyers cannot combine the tax credit advance and an FHA mortgage to get “cash back” on their loan. They also cannot borrow more for the tax-credit-funded second mortgage than the total required for their downpayment, closing costs, and prepaid expenses.

Alison Rice is senior editor, online, at BUILDER magazine.

Linked from: http://www.builderonline.com/green-building/five-ways-to-build-affordable-energy-star-rated-houses.aspx?printerfriendly=true

It’s hard to ignore the juggernaut that the energy-efficient green construction has become in the home building industry, but it’s also difficult not to seem traumatized by the added cost that’s often associated with it. “The green thing gets a lot of press … but there aren’t a lot of folks that are fully equipped to build efficiently,” observes Jeremy Graves, a builder in South Carolina that is determined to do just that.

His company, FirstCoast Homes, bucks the “green costs more” trend, managing to build Energy Star-rated homes that are 20% to 30% more efficient than standard homes at a cost of just $1,000 more per house than the builder’s previous methods.

Based in Charleston, S.C., FirstCoast is a five-year-old company that builds primarily starter homes and first-time move-up product. Prices are on the low end, starting at $129,000 and only reaching as high as $209,000, but this does not prevent the company from building for efficiency. Sensing that affordable energy-efficient construction could be the future of home building, the company in 2007, announced a plan to build only Energy Star-qualified homes.

“One of the most important things we have to deal with today is our energy usage,” explains Graves, the company president. “I decided that it was time to put our money where our mouth is and bring this to market.” Reducing energy consumption in this country is an important issue, he says, because buildings account for almost 40% of the demand.

To increase the energy efficiency of its homes, FirstCoast now builds every home with effective insulation, high-performance windows, sealed ducts, efficient heating and cooling systems, and energy-efficient appliances. Specifically, that means the company upgraded to Johns Manville insulation at R-13 for walls and R-30 for ceilings, high-performance low-E windows, Comfortmaker high-efficiency 14 SEER heat pumps, and Energy Star-rated Whirlpool appliances, among other moves. It also conducts duct blaster and blower tests on all homes to ensure there are no leaks.

These practices, the builder says, create energy-efficient homes, which help protect the environment by reducing air pollution because lower demand for energy equates to less greenhouse gas emissions from power plants. But even more important than the “why” behind FirstCoast’s green efforts is the “how,” since the builder has been able to accomplish this at relatively low price points, simply by making small changes to its processes and procedures.

Curious? So were we. Here are FirstCoast’s five strategies for building Energy Star rated homes that make going green affordable for buyers and builders alike.

1. Back to Basics

There are many technologies and products available that can help you build a super efficient house, but many of the options are pricey. “All that stuff is prohibitive,” Graves says. Instead, FirstCoast uses typical building methods and improves upon them until the home meets Energy Star requirements. One way the company does this is with proper installation and third-party evaluation of many of the systems in the house.

2. The Great Seal

Perhaps one of the most important parts of building an efficient home is the tightness of the building envelope. To do this, FirstCoast uses Home Energy Solutions of Charleston to perform methodical sealing of the shell. “We typically do a combination of foam sealing and caulking throughout the exterior of the building envelope,” says Claude St. Hilaire, principal of the company. “We use foam to seal the wire and plumbing penetrations through the OSB sheathing, caulk at the base plate and corners, and low-expansion foam around the doors and the windows.” This sealing package, St. Hilaire says, reduces the potential air infiltration to the home by about 30%, which “has a direct correlation to air conditioning sizing.”

3. Proper Insulation Installation

Spray foam insulation is all the rage because of its effectiveness at sealing a building, but builders complain that the added cost is significant. Because FirstCoast implemented sealing procedures, the company sticks with fiberglass insulation, but stresses proper installation. “The thing with the insulation is not so much that there is an increase in cost, but you have to make sure that you’re holding your sub fully accountable for installing the insulation properly,” says Bruce Kiriloff, purchasing and estimating manager at FirstCoast. Kiriloff continues: “There is no price increase. You’re just making sure people are doing what they’re supposed to do per the scope of work or insulation installation guidelines.”

4. Strategic Cost Savings

Even with all the upgrades, FirstCoast realizes savings from strategic moves. The company upgraded its windows to low-E high-performance units, but it reduced the number of windows it uses, which reduces costs. “When we increase costs, we subtract maybe two windows,” Graves says. He continues: “We look at where we’re going to increase costs, and then we try to be smart about our design. So rather than just build the same old thing a new way, we look at where we could eliminate some of the large [cost] impacts.” Sealing the building envelope, proper insulation installation, and upgraded windows allowed the company to reduce the air-handling needs of the air conditioning unit by one ton. This move alone saved between $400 to $800 per house.

5. Look for Back-End Deals

FirstCoast says regional programs may also help defray the added costs of shifting to Energy Star building practices and recommends builders connect with local power companies for rebate programs and other benefits. “Check with your local utilities and municipalities and see where your back-end deals are for being energy-efficient,” Kiriloff says. “I think you’ll find that the cost [of building Energy Star] is not what you think it is.” Graves agrees. “Quite a few of our homes are in [electric] co-ops and by doing some of their prescriptive requirements we’ve been able to off-set some of that cost,” he says.

Nigel Maynard is senior editor, products, at BUILDER magazine.

Linked from: http://belmar.com/green-news/2009/04/belmar-featured-in-pbs-green-builders-documentary

Belmar is receiving national exposure in the NJN Public Television Special, A Green Revolution Takes Root in the Garden State , which premiered on PBS stations beginning on Sunday, April 19. The documentary was filmed in Hi-Def format, and includes several stunning clips of Belmar, whose green building efforts are highlighted in the documentary.

“A quiet green revolution in the building world is evolving, and a first wave of innovative green design projects large and small have already hit the ground. NJN’s one-hour high definition special Green Builders profiles a cast of green building pioneers who have taken the leap into making their part of the ‘built environment’ a more energy-efficient and environmentally friendly place,” according ot the NJN advance about the documentary.

Funded by the Geraldine R. Dodge Foundation, with support from the Cape Branch Foundation, Green Builders makes an excellent case for green building, and manages to include a vast array of approaches and viewpoints in the 60-minute broadcast. The documentary’s central thesis is one I believe strongly in, namely, that there is “no single way to build green.”

As the NJN advance describes the program: “Green Builders takes a wide-ranging look at a variety of approaches and levels of commitment, and at the individuals who have helped turn green building theory into reality. These individuals are not just builders and designers; they’re teachers and homeowners, corporate leaders and academic specialists, leaders of institutions and universities as well as renegade inventors. From The Willow School to PNC Bank to the first solar-hydrogen home called The Hopewell Project, people talk about why they made the move to go green, what the challenges were, and how their project has fared. In most cases, one finds that a green building project has more to do with smart planning and a mindset change about energy use than expensive technologies or consumer sacrifice. Innovation helps, and there are plenty of innovations included in Green Builders that are making green technology effective and affordable. Geothermal storage, wind farms and extensive solar array systems are examined in the program. As the stories in the documentary demonstrate, it is crucial for us to change our perspective on how we build, recognizing the wasteful impacts of the traditional mode of building and operating our structures, and realizing the environmental and economic benefits of building green. Only then will the green building movement be successful.”

The documentary also emphasizes a point that I consider essential to the long-term success of green efforts in the United States — the need to develop green techniques, policies and technologies that improve the environment without the need to sacrifice. As the NJN website explains, “The individuals in Green Builders have made the move to building green without suffering, sacrificing, or experimenting with a wispy might-happen. These are real projects on the ground, working businesses and college campuses that prove you can change your carbon footprint once you change your way of looking at how a structure operates. Collectively, the green builders are building the foundation for a more widespread movement toward making America’s built environment less harmful to the dwindling supply of healthy natural resources and even less expensive to operate. Their homes and offices are the proving grounds for green building, and their personal experiences reveal that building greener is less complicated and expensive than you probably thought, and more rewarding in the long run.”

Green Builders was produced by NJN’s very talented writer-producer Bob Szuter, who also produced The Highlands Rediscovered and Turning the Tide . To see an online stream of the documentary, click here . The segment about Belmar starts at about 35:20 into the video. The interview with Mayor Ken Pringle, and those of a number of others who appear in the documentary were, taped at a well-known, 100-year old Belmar landmark. Can anyone tell from the background?

Green Builders Video

http://www.njn.net/television/specials/greenbuilders/

http://www.youtube.com/watch?v=MIGFuwHcQP8