Recently,  federal officials reversed a decision to allow first-time home buyers to use the $8,000 tax credit to borrow and use as a down payment on their first home.

US Department of Housing and Urban Development Secretary Shaun Donovan had told the National Association of Home Builders that HUD would let banks and local governments offer short-term "bridge Loans" to provide down payments for first-time home buyers who are eligible for the tax credit.  This would have only been available to those borrowers who applied for federally insured mortgages such as Federal Housing Administration loans.

Real estate agents, home builders and lenders were very excited about the proposal thinking it would be very favorable to first-time home buyers; however, not everyone thought using the tax credit as collateral on the down payment was a grand idea.

"That tax credit should be savings; not debt," said Patricia Garcia-Duarte, executive director of Neighborhood Housing Services in Phoenix.

Garcia-Duarte said the proposal too closely resembled a now illegal practice known as seller-funded down-payment assistance, which allowed a home's seller to "gift" the down payment to a specific buyer through a non-profit organization.

Also, according to IRS officials who shot down the HUD plan, these loans could also create income-tax issues.

So, for now, there is still a tax credit of $8,000 for first-time home buyers and an additional $10,000 tax credit if they purchase a new home that has never been lived in.

If you are a first-time home buyer and wish to take advantage of these tax credits, be sure to consult with your tax adviser or tax attorney to ascertain how the tax credit will benefit you before entering into a contract to purchase your first home.

If you would like to search the MLS for listings in San Luis Obispo County, visit my website. If you have any real estate questions or general questions about Paso Robles or San Luis Obispo County, please contact me via email or call me at (805) 235-0234 for more information.

It starts with a dream...