Buyers Can Tap Tax Credit For Down Payment

Secretary of Housing, Shaun Donovan reported on Tuesday that the Federal Housing Administration is working on a policy that will allow FHA approved lenders, HUD approved nonprofits and state and local housing finance agencies to "monetize" the tax credit through short-term bridge loans.

First-time home buyers will soon be able to access their $8000 federal tax credit when closing on a home through a short-term bridge loan that will cover their down payment on FHA-backed loans.

At the National Association of Realtors midyear conference in Washington, D.C., Donovan told members "We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit.  Donovan added "We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a down payment".

Donovan said the first-time homebuyer tax credit will benefit communities struggling to deal with an oversupply of housing.  The National Association of Home Builders estimates that the tax credit would spur 160,000 home sales--101,000 purchases by first-time buyers, and 59,000 purchases by existing homeowners who will be able to trade up because a first-time buyer purchased their home.

The best rates on loans eligible for purchase by Fannie Mae and Freddie Mac require 20 percent down payments, and private mortgage insurers typically require minimum down payments of 5 percent to 10 percent.  But FHA's minimum down-payment requirements remains relatively modest at 3.5 percent.

With the Obama administration's Making Home Affordable initiative, which is aimed at helping 7 to 9 million homeowners modify or refinance their loans, will also help take pressure off of inventories, Donovan said.

FHA's market share has grown from 1.9 percent in the fourth quarter of 2006, reaching 23.7 percent in the last three months of 2008, and continues to grow, Donovan said.  He said FHA is on track to guarantee $290 billion in mortgages in fiscal year 2008, and that the Obama administration's new budget asks lawmakers to approve up to $400 billion in loan guarantees in 2010, or about 2.25 million mortgages.

Call me to find out more about the First-Time Home Buyer Tax Credit, (775) 287-8222.  I am Fernley's  longest-serving RE/MAX agent.