Federal Tax Credit Can Be Used Now Toward Home Purchase
FHA LOANS, INDUSTRY NEWS, TIPS FOR BUYERS
June 7th, 2009
It’s official! Qualified first-time homebuyers can now use their tax credit for a portion of the downpayment for the purchase of a home or closing costs using FHA financing. The U.S.Department of Housing and Urban Development (HUD) announced recently this news about monetizing the first-time buyer tax credit. President Obama has been pushing for this change even though the IRS was opposed to the idea.
FHA loans require a 3.5% minimum downpayment. The prospective home buyer must still tender the minimum downpayment but can use an advance on the tax credit to lower their loan amount or pay for closing costs. This will help the borrower preserve cash on hand or lower the monthly payment if used to supplement their down payment. The advance on the tax credit is referred to as a bridge loan that is to be repaid when the borrower receives their tax refund. Failure to repay the advance would result in the advance becoming a loan secured as a second against the property payable over 10 years at an interest rate slightly higher than the rate on the first mortgage.
I spoke with a HUD representative recently at a real estate conference in Sacramento and she pointed out a disturbing trend. Lenders that offer FHA loans, which are insured by the government, are underwriting the loans more stringently than required by FHA. Apparently, lenders are over-reacting due to the blame being directed their way as a result of the housing market meltdown. FHA loans have more liberal credit guidelines than most loans offered in the mortgage marketplace.
Contact me with any questions.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Interesting..