What are the requirements regarding real estate tax credits to be received by a borrower at closing?

Where real estate taxes are paid in arrears, the seller’s real estate tax credit may be used to meet the Borrower’s Minimum Required Investment (MRI), if the Mortgagee documents that the Borrower had sufficient assets to meet the MRI and the Borrower paid closing costs and other prepaid items at the time of underwriting. This permits the Borrower to bring a portion of their MRI to the closing and combine that portion with the real estate tax credit for their total MRI.    

For additional information see Handbook 4000.1 II.A.4.d.i(B)(2)(j) or II.A.5.c.i(B)(2)(j) available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.

Topic Number: KA-04371