What kinds of penalties apply when the home is sold or the loan is prepaid?
NIFA loans do not carry a prepayment penalty. There is a potential IRS recapture tax that is in effect during the first nine years of the loan. If the home is sold for a gain within the initial nine-year period, a recapture tax may be due the IRS, depending upon certain circumstances. However, for all loans closed on or after June 1, 2004, and financed through the Single Family Bond Program, NIFA will reimburse any homebuyer who sells his or her home and is required to pay the federal recapture tax. See Recapture Tax Reimbursement.
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