$8,000 Tax Credit Can Now Be Used for Down Payment and Closing Costs
According to the Obama administration, first-time home buyers will soon be able to use the $8,000 tax credit as cash for use as a down payment and/or for closing costs if the buyer uses Federal Housing Administration (FHA) mortgage financing.
In a statement issued on May 29, the Department of Housing and Urban Development (HUD) clarified that buyers taking out FHA loans via private lenders would need to invest some of their own funds towards the minimum 3.5 percent down payment.
If your loan is obtained through a state housing agency that currently offers a program for tax-credit monetization, you will be able to take advantage of a bridge loan which can be used for a down payment. States with tax credit loan programs include New Mexico, Missouri, Delaware, Pennsylvania, Tennessee, Kentucky, Idaho, New Jersey, and Ohio.
These tax credit loan programs are very similar in nature with low-interest rates, or no interest short-term second loans secured by the property. If the $8,000 tax credit proceeds are not used to pay the loan off in full, the loan is converted into a long-term second mortgage.
The recent news from the Obama administration has many in the industry excited that buyers can now use the $8,000 tax credit, or however much each buyer qualifies for, for escrow fees, settlement fees, larger down payment, or for “buying down” the interest rate, which helps to reduce the monthly payment amounts.
In order to take advantage of using the $8,000 tax credit for down payment and closing costs, the buyer must not have owned a principal residence during the past three years and your household gross income cannot exceed $95,000 (single taxpayers) or $170,000 (jointly filing taxpayers). The contract on your new home must be written before November 30, 2009, and your loan must be through an FHA approved lender.
I am involved with a BNI referal group, and a number of members have mentioned the $8000 credit…it really is a great selling point at this point in time.
I hadn't heard of the new $8,000 incentive from Obama – this should help mortgage lenders and financial markets out by encouraging payment (instead of simply defaulting). I'm worried about the effect it'll have on the opposite end of the spectrum, as this would simply require printing money. With no one purchasing t-bills to back freshly printed money, this might not work at all.
Most lenders will want a detailed accounting of the homeowners’ finances, or a financial worksheet, to accompany the hardship loan modification letter. They usually want proof of income such as current pay stubs, tax returns and bank statements. Each mortgage lender will have their own requirements and they will likely vary from lender to lender.
Many homeowners will enlist the help of an attorney or a loss mitigation specialist to help with the preparation of the modification request. These professionals often have a better idea of what the mortgage lender is looking for and can advise the homeowner accordingly. An experienced foreclosure attorney or loss mitigation specialist will be able to put the request package together in such a way that the lender will give the hardship loan modification request serious consideration.
I think this was a good move by Obama to help jump start the housing market. Lord knows it’s going to take a lot of work to get it going where it needs to be again.
I’m planning on getting a fha loan but, will need a co-signer. If I get a co-signer, am I still eligible for the 8,000 tax credit if the co-signer is not a first-time home buyer?
Some loan officers are also wondering about monetizing the $8000 tax credit. Remember that this is the best time to become a first time home buyer. The interest rates have gone very low and there are many homes for you to choose from. Do not miss this opportunity to get a home loans and become a home owner. Keep in mind that this plan applies only to the first time home buyers and not to all people.
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As a conservative, I am a bit torn by the Home Purchase tax credit. I definitely was against the Cash for Clunkers program. I thought that was totally rediculous. I suppose this housing tax credit has it’s merits.
Using it for a down payment is a Catch 22 situation. Since it takes 3 mths or longer to get your check, where does the money come from to actually make the down payment at closing? Some states are offering a program to facilitate this….
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Great Article!! I enjoyed reading this and appreciate you taking the time to post it!