Good News.... not so good
Over this past weekend, several articles were published announcing the potential opportunity for first-time home buyers to apply the $8,000 tax credit for the purchase of a home as a down payment at closing. I distributed an email to many of my first-time home buyers announcing the good news - yet encouraging that they continue to follow the news as the details had not yet been announced on how this option would work.
There was substantial push-back on the announcement, and many questions about how this 'bridge loan' process would work, and how it would be funded. Enough push back that the potential opportunity has been withdrawn for the current time.
While the use of the tax credit as a down payment is not currently available, the $8,000 tax credit is still a reality for first-time home buyers who purchase a home prior to 12/1/2009. It is still beneficial to take advantage of the low housing prices, low interest rates and the $8000 tax credit for first-time home buyers.
A little more detail....
HUD has pulled/rescinded their Mortgagee Letter 9-15 which allowed tax credit loans. They are apparently analyzing the issues with it. Some details, it appears, need to be worked out in the language.
In regards to FHA loans, a borrower can only obtain monies for their actual downpayment of 3.5% by the following :
- Their own funds
- up to 100% of a gift from a relative/family member
- From the Federal, state, and local governmental agencies and nonprofit instrumentalities of government
- FHA approved non-profits
- monies from their employer in a form of employee contribution
- monies from secured borrowed funds... IE. borrowing equity from your home to buy another home or borrowing against your car that is free and clear or borrowing from your 401-k, etc, etc
HUD does not allow for monies to be borrowed or given to, in any form that wasn't mention above, to be used for the down payment. When it comes to FHA loans / FHA mortgages, you could get monies for your down payment from the items mentioned above. The Mortgagee Letter 9-15, that has been revoked for now, allowed for lenders to secure a short term loan or bridge loan against the $8,000 to be used to purchase a home. However, it can't be used for the actual down payment, because it goes against the basic FHA guidelines of down payment monies of 3.5%.