Is it possible to use the $8,000 tax credit as a down payment when you purchase your home in Massachusetts?
Although this has not been the case to date the situation may soon change.
In a recent speech, Secretary of Housing and Urban Development, Shaun Donovan mentioned that the FHA is currently working on a proposal that may allow home buyers being able to use the $8,000 tax credit as a down payment. Speaking to The National Association of Home Builders, he stated the Federal Housing Administration (FHA) will allow home buyers to apply the $8,000 first-time home buyer tax credit toward the purchase of FHA-insured home.
Previous to this announcement, families could only access the tax credit after filing their tax returns with the IRS. According to new statement, FHA rules will allow state Housing Finance Agencies and certain non-profits to "monetize" up to the full amount of the tax credit (depending on the amount of the mortgage) allowing borrowers immediate access to these funds for use as a down payment. Home buyers who use FHA-approved lenders will be able to apply the tax credit to their down payment in excess of 3.5 percent of appraised value of the home or to their closing costs. The FHA's new mortgagee letter explains the details.
This addresses one of the major hurdles to the purchase of a home - coming up with the down payment with a solution of tapping into the tax credit early. You can do this with an advance from an FHA approved lender or nonprofit; however, you will likely have to repay the money soon after getting your tax refund. The advance cannot be used for the 3.5 percent down payment that is required by FHA but it can be applied to closing costs or to increase the size of your down payment.
With the advent of this down payment program certain entities may come forward who will claim to be able to "help you" get these funds. Of course, this type of help will have a price attached to it. Be very careful to always deal with a qualified lender and check with a tax consultant.
Related Post:
Taking Advantage of the $8000 First-time Home Buyer Tax Credit
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