Thursday, May 14, 2009

FHA Allows $8000 Tax Credit to be used Towards Downpayment

FHA Allows $8000 Tax Credit to be used Towards Home Purchase Down Payment

May 12, 2009 - At an address to several thousand REALTORS at the Real Estate Summit just held in Washington DC, the secretary of the U.S. Department of Housing and Urban Development, Shaun Donovan, said that the Federal Housing Administration is going to permit its lenders to allow homeowners to use the $8,000 tax credit as a downpayment.

“We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a downpayment,” Donovan said. According to Donovan, the FHA’s approved lenders will be permitted to “monetize” the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.

This will greatly help first time home buyers with the purchase of a home, perhaps enabling them to increase their buying power. Previously home buyers would have to wait until 6-8 weeks after they purchased a home to access the tax credit by filling an amended 2008 tax return, or wait until they file their 2009 return next year.

We will have to see what sort of interest rate the FHA will charge for these bridge loans, but typically they keep their rates low. Also, because this is a bridge loan, you will be paying it back within a few months so the interest paid will be minimal.

With the deadline for receiving the tax credit rapidly approaching (November 30, 2009), this is just another reason that first time home buyers need to get serious about finding their dream home (or as close as they can get to it). You must have a home under contract by September to assure that it will close on time to qualify for the credit. Remember:


Contact one of Armstrong Field Real Estate's Buyer Agents today to start the search for your home.