Yesterday, the HUD secretary officially released the details of the FHA's plan to allow first time home buyers to use their $8,000 tax credit at closing.  When the plan was first announced, the speculation was that it would have allowed buyers to all or a portion towards their down payment.  However yesterday's press release explained that buyers will only be able to apply the amount to closing costs or towards an additional down payment.  Buyers will still need to make a down payment of at least 3.5% to qualify for an FHA mortgage. 

While this may have some impact in other markets, in Charlotte this move by HUD will have very little, if any, effect on improving our market.  Since the end of February, 2,193 single family detached homes have sold in Mecklenburg, Cabarrus, and Union counties below the FHA limit of $303,750.  Of those sales, 54% of the sellers offered the buyer a concession, most likely paid closing costs.  When you subtract out the number of cash sales (since a cash buyer wouldn't care what the seller was paying...it effects their net price anyway), the number jumps to 69%.  Of the 1,645 sales at or below $200,000, 55% of sellers offered concessions (including cash sales, which would increase that number further). 

So with closing costs, the buyer could use the money in addition to their down payment to lower their monthly payments.  That sounds nicer than it really is.  Study any amortization chart and you'll see that at today's interest rates, every thousand dollars and down payments only lowers the monthly payment by about $4.80.  Applied completely, it would lower the buyer's payments around $144 a month, which isn't much of a windfall. 

Sellers hoping this would have helped them move up should think again.  Unfortunately, I think this revision to the first time buyer tax credit will have very little impact here in Charlotte. 

Charlotte Real Estate