Using First-Time Homebuyer Tax Credits for the Downpayment - It's GONE !!!! - The story of the $8,000 tax credit

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The $8,000 first time homebuyers TAX CREDIT - HUD has saved the day. Well, okay, it saved it for a day. It's gone now, recinded, at least for now. Everything that you have been reading about yesterday, about FHA/HUD putting out mortgagee letter 2009-15, it's no longer there. Tom Burris had noticed this yesterday and I just got off the phone this morning with the HUD office. For reasons unknown, this letter, ML 09-15, has been taken off the self. Besides, I have my reasons to this and also felt that many of the blogs posted yesterday were incorrect. Here is why....




fha loans & fha mortgages


In regards to FHA loans, a borrower can only obtain monies for their actual downpayment of 3.5% by the following :

  • Their own funds
  • up to 100% of a gift from a relative/family member
  • From the Federal, state, and local governmental agencies and nonprofit instrumentalities of government
  • FHA approved non-profits 
  • monies from their employer in a form of employee contribution
  • monies from secured borrowed funds... IE. borrowing equity from your home to buy another home or borrowing against your car that is free and clear or borrowing from your 401-k, etc, etc




Here is the major confusion that was put out yesterday both HUD, NAR, and many realtors and loan officers that wrote about this.  In the body of the mortgagee letter, ML 09-15, at the bottom, it stated :

The Tax Credit: Short-Term Loan: 

Entities that can offer the tax credit advance with short-term loans:

  • Federal, state, and local governmental agencies and nonprofit instrumentalities of government, FHA-approved nonprofits, and FHA-approved mortgagees may provide short-term or "bridge loans" secured only by the anticipated tax credit due the homebuyer as collateral.


The confusion : It states, As collateral and not as a secured lien against the home, but as a secured loan against the collateral. Which in this case would be the $8,000 tax credit, which would be secured against.

Because of this, HUD does not allow for monies to be borrowed or given to in any form that I did not mention above, to be used for the down payment.  The reality of it all, basically everything that was stated in the mortgagee letter, that has been revoked for now, is old school FHA. When it comes to FHA loans / FHA mortgages, you could get monies for your down payment from the items that mentioned above, which is mentioned in the mortgagee letter.  Well, was mentioned...  One caveat to all of this is that HUD was going to allow for lenders to secure a short term loan or bridge loan against the $8,000 to be used to purchase a home. But again, that can't be used for the actual down payment, because it goes against the basic FHA guidelines of downpayment monies of 3.5%. Now, unless HUD changed this, it does not clearly state this in the mortgagee letter, even though that letter is no longer valid.



Summary : When I read the ML 09-15 the other day, all of this jumped into my head. But I didn't have time to dissect all of this, yet I wanted to get this out to the public. After seeing many blogs written with inaccurate information, because NAR stated certain things from a HUD spokesperson, it was never clear, in which this gave me large goose bumps. My advice, consult an FHA Expert, even if you hear it from others that are high up, such as the NAR. And be careful on those that call themselves Experts also. I personally think that this was immature of several agencies for putting this information out there without verifying it's accuracy and intentions. And I would have to assume that HUD feels the same way since they took this mortgagee letter off their site and off the HUD clips site.  Thanks




EXTREMELY IMPORTANT REMINDER : Just because HUD or any other source puts information out there, doesn't mean it will happen. Keep in mind that most lenders have overlays and can add to certain rules and or guidelines.   


And just for the fact that HUD says it's fraud to obtain the tax credit prior to closing. This question has been asked to HUD by many of us and their response is FRAUD.  Why?  You are receiving the monies before you are buying the house. Yes, you can give the IRS the address prior and a potential closing date. But I smell shit hitting the fan very soon, since a lot of this is still new. And remember those lender overlays?  I know some lenders and underwriters that won't allow this type of loan to go to closing.


Ken Cook wrote a very short and brief blog about all of this. It's very clear. FALSE info flying around about the first time tax credit used as a downpayment.



For real, updated information on the First time Homebuyer's Tax Credit, please read :  $8,000 first time homebuyers tax credit.



TAX FRAUD - Are you getting your tax credit before you go to settlement, and it's not from a non-profit agency or from a Federal, State, or Local agency?  Then you might be committing FRAUD.  Please read : The $8,000 first time homebuyers tax credit - FRAUD ALERT



$8,000 TAX CREIDT HAS BEEN AMENDED as of 05-29-09 - The First time homebuyer $8,000 tax credit has been amended - May 29th, 2009 - Buyer, beware !!! You still need 3.5% of your own money for the down payment. It can't come way of an upfront loan through the tax credit.



05/15/09 - 11:59 pm UPDATE : Hey everyone – Please read this comment by Gerry Suarez – It’s very important -



My Series on the First time homebuyers $8,000 tax credit - Everything you need to now, from start to finish - What's allowed and what's not allowed :



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Re-Blogged 20 times:

Re-Blogged By Re-Blogged At
  1. Lenn Harley 05/14/2009 04:04 AM
  2. Jen Anderson 05/14/2009 05:32 AM
  3. Sheldon Neal 05/14/2009 06:08 AM
  4. Randy Prothero 05/14/2009 06:39 AM
  5. Colleen Craig 05/14/2009 06:49 AM
  6. Karen Lindholm 05/14/2009 07:02 AM
  7. Terrie Leighton 05/14/2009 08:23 AM
  8. Jennifer Kinzle 05/14/2009 09:34 AM
  9. Gordon Sloan 05/14/2009 09:47 AM
  10. Renée Donohue~Home Photography 05/14/2009 11:17 AM
  11. Kerry Lucasse 05/14/2009 02:11 PM
  12. Roland Woodworth 05/14/2009 06:23 PM
  13. Gabe Sanders 05/15/2009 01:04 AM
  14. Melissa Breeland 05/15/2009 01:43 AM
  15. Marzena Melby 05/15/2009 03:20 AM
  16. Jeannette Neerpat 05/15/2009 05:47 AM
  17. Bob Travaglione 05/15/2009 10:43 AM
  18. DeAndrea "Dee Dee" Jones 05/15/2009 03:22 PM
  19. Brian Burke 05/15/2009 03:35 PM
  20. Rebecca Gaujot, Realtor® 05/15/2009 03:54 PM
  21. Morris Childs 05/15/2009 05:59 PM
  22. Sandy Noll 05/18/2009 05:07 PM
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans


BRUCE & MARY .... . I agree 110% and if I was a consumer, I would be very scared in who to trust thanks.

DAN..... I think anything could be better and help out in this real estate market. What ticks me off is that the gov't and HUD should have thought this through a year ago when the Tax Credit was first introduced. Are they idiots?  People need money to buy... getting it after a closing will only help a few, not the masses.  thanks

CHERIE..... . now I am confused... you stated that you contacted HUD, and received an e-mail?  Seriously, forget about the e-mail.  When did you receive that?  In regards to contacting HUD?  The yo yo that you talked to, has no clue then.  If I contacted HUD to question this and they told me that it was still a go, I would have then asked why the mortgagee letter, ML 09-15, was taken off the site. We need to question people and not just accept answers just because one said so. Just my opinion.  thanks    PS>.. please send me the e-mail that you received.

HANS.... .  those dancing on the roof tops?  Now what are they doing?  In regards to the Colorado program?  Big question for you, in which I think I know the answer. There needs to be clarification here.... don't be like HUD... ;o)   It's a state bond program that lenders can participate in, right?  But there are usually income and or credit restrictions on these. Question, what are the rates on the 1st mortgage for these?  thanks


MATT.... . 2 things... premature or not..  anyone can say that it will happen or appear, even after it's been rescinded. Just like low life sales people, they will tell you what you want, until the smoke clears. And then what?  I will just wait and not hold my breath.

In regards to HUD giving the Memphis area builders the go ahead?  Someone is leading you on.  You can already do this, as a non-profit organization. The big things about the bridge loan that was stated in the letter, which was wrong by HUD.. was having a FHA approved lender to be allowed to give a bridge loan for the down payment... but the builders leagues?  They can already do this and don't need the letter or anyone's approval or go ahead.  This has been a basic HUD guideline for a llloooonnngggg time.  thanks


JOAN..... people won't listen, even if it was the truth.  And I am sure those that found out the truth, there will be some that will still pass this bogus information out, in hopes that it will happen. And even if it doesn't, if they get great google juice and searched well, they will pick up more clients and then try to work with them.  A great example of this ??  Loan officers that give clients lower rates than they can get now, in anticipation that rates drop further, based on the gov'ts promises from months ago. I just lost a client that was promised something that won't happen. I know, because we all get our money from the same place and nobody, and I mean nobody, could beat me out by $5,000. thanks


May 15, 2009 04:19 PM #114
Diane Schubach
Laffey Fine Homes - Port Washington, NY

I just wrote up an offer and the loan officer told me that my buyer would be using some of the tax credit for the down payment. So I'm not rescinding my blog post just yet.

May 15, 2009 04:51 PM #115
Morris Childs
PEP source - Spartanburg, SC

Maybe one day in the near future, they will make up their minds and set forth some guidelines and set them in stone. Great Post.

May 15, 2009 05:57 PM #116
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans


GERRY.....  thanks for clarifying to a few others.  In regards to the Memphis area thing with the builders....  you and I know this is legal, without the mortgage letter, if done through a non-profit. We just need to keep spreading this, until HUD comes out with something different... if they do.  thanks.. PS>. and I never have a problem with you jumping in.

BETTINA.... . thanks for stopping by and for your support. PS.. some good things can be true, just not in this case.  ;o)

STUART.... . my pleasure and thanks for stopping by.

ROB..... Ah, there could be worse with egg on thy face.  Just throw it back at the NAR and HUD and blame it on them..  that shouldn't be hard for now, right?

DONNE... . oh well.  How did you do with the explaining?  Good responses?  bad?   thanks

BOB......  well, for many it was a bummer I guess. But I have been screaming about this since last year, when the $7,500 tax credit came out.  I thought it was common sense that these tax credits wouldn't really work as well as they had hoped they would.  Why?  Many buyers need the money up front. What was the gov't thinking?  Are they that stupid?   Seriously.. let's think about that for a moment. They talk about trying to stimulate the economy. I just don't get it and their reasoning.

MELISSA.... . I think many us agree that this was too good to be true. But there are still ways to make this work and to be creative. You just need a very above average loan officer.  thanks


May 15, 2009 06:10 PM #117
Michael Sahlman - Keller Williams Realty - Miami Beach, FL
e-PRO - Miami Beach Florida Luxury Homes

Well it sure pays to check the facts and then double-check. Thanks for clearing this up for those of us who were about to talk it up. I love these statements when they say more details to follow. That was the detail that made me hesitate. Almost sounds like the sensationalism rampant on CNN's and FOx's Breaking News.

May 16, 2009 12:25 AM #118
Tom Burris
NMLS# 335055 - Baton Rouge, LA
Texas/Louisiana Mortgage Pro - 13 YRS Experience,,id=206293,00.html


The above link is a FAQ from Which clearly states that you cannot claim the credit until you close.

We asked HUD the same question and they said it was NOT ALLOWED!!

Desperate people are committing fraud all over right now.

I also believe that a realtor coaching a buyer into such actions are also committing FRAUD!!!


May 16, 2009 02:25 AM #119
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator

This is getting a little annoying. "I talked to a lender and ..." Well, I'm a lender who actually knows what is happening in my industry because I depend on ACCURATE and LEGAL information to feed my family and keep my employees satisfied. Chances are they didn't talk to a LENDER they talked to a loan officer who works for someone who has no clue or refuses to share information down the line. As Jeff and Gerry have both stated filing and ammended tax return BEFORE purchasing the home is absolutely against the spirit AND the letter of the 5405 and if anyone calling themselves a CPA is advising differently they are advising to Break The Law and if THIS lender discovers you I will report you as is my duty under the law that gives me the license to be a lender.

May 16, 2009 02:26 AM #120
William James Walton Sr.
WEICHERT, REALTORS® - Briotti Group - Waterbury, CT
Greater Waterbury Real Estate

This is too funny, Jeff. My broker e-mailed me this info 4 days after I was aware of it when it was announced. Glad you posted this so I could direct him to it.

May 16, 2009 06:18 AM #121
Franklin & Brentwood, TN Homes Mike Nastri - Rodney Kennedy
Keller Williams Realty - Franklin, TN
It matters to us as much as it matters to you.

Well, my apologies, I read it and I was wrong as they seem to have changed their position.  I do believe they will try to make provisions for this to happen, but until the process is in place and changes are made to make it happen, I will stay tuned to your posts. 

Thanks Jeff

May 16, 2009 07:58 AM #122
Franklin & Brentwood, TN Homes Mike Nastri - Rodney Kennedy
Keller Williams Realty - Franklin, TN
It matters to us as much as it matters to you.

Would the FHA Guidelines also apply to someone wishing to augment a 'conventional loan' down payment or could such a bridge loan be used?   Assuming they could come up with 5% and get a conventional loan.

May 16, 2009 08:14 AM #123
Matt Stigliano
Kimberly Howell Properties (210) 646-HOME - San Antonio, TX

Jeff - Here's some links to posts I wrote about it:

NAR, You Silly Old Goat...Why Would You Let This Be Emailed To Every Realtor® After Yesterday?

(This was my response to the mess that this created and the subsequent email I received from NAR once again announcing the info - 3 days later.)

Questions About The First Time Home Buyer Tax Credit

(This was my post based on the constant keyword searches I was seeing involving questions and misinformation about the First Time Home Buyer Tax Credit.)

FRAUD ALERT - Advice on the $8,000 first time homebuyers Tax Credit - Do you chance it??? (RE-BLOG)

(This is my re-blog of your post with a bit of commentary attached to it.)

I hope I was the "Matt" you were referring to when you said post the links.  If not, delete away!

May 17, 2009 06:29 AM #124
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans


TERI..... it is a shame when those that have a large following talk, yet when it's wrong of misleading, that it just ruins the industry even more. Now we have 50 million chickens running around with their heads cut off, instead of 20 million.. lol  thanks

BRIAN & MARIE..... . I felt weird putting myself out there, considering that it was written in stone at the time.  But I guess HUD finally realized the same. You just have to wonder who actually reviews their work before posting it to the public.  thanks

JASON C. .... . my pleasure and I hope this gets out to many more that think differently right now. We need to get the word out.  thanks for stopping by.

DARIN..... I am not sure if I was up late last night or any other night.. lol  I am trying to get back to some semi normal schedule. But in regards to your statement about LTV and CLTV issues?  Not really... it doesn't matter, because in what HUD was proposing and what is currently acceptable, there are no CLTV restrictions, not with FHA mortgages. Yes, with other types of mortgages. In any case, I haven't really received too many calls or e-mails on this topic. Probably because I have many clients that follow my blogs... so then there is not need to ask. But I do know we need to get this out to the public...  especially after most news agencies put out the other misinformation. thanks

UNKNOWN.... . no, I haven't seen that, but when I get done here, I will take a look at it.  thanks

CHRISTIANNE.... . what kind of post were you going to write?  That they finally put a good program out there to help buyers?  I just wrote a blog today on what is legal, on how to use the tax credit. Please read that, that might help.

CINDY.....  well, you can easily blame the media, HUD, and the NAR... point the finger at them. You were just repeating news that you would think was accurate. But there should be lesson learned with this one also. But I would bet many will ignore that lesson & message.  thanks

ANN..... my personal opinion about the gov't and HUD?  This just says that we need better leaders. Sure, people make mistakes, but this was just more than a simple mistake. Not sure how they overlooked this one.  thanks


May 17, 2009 11:41 AM #125
Natalie Langford
Realty Negotiations - Winchester, VA
Winchester, VA Real Estate

VAR Buzz led me here - and for a good reason, too!  What a superbly written post!  I had heard the buzz, but this is the most comprehensive explanation I've seen.

May 18, 2009 12:25 PM #126
Pat & Wayne Harriman
Harriman Real Estate, LLC (203) 672-4499 - Wallingford, CT
Broker/Owners, Wallingford CT Real Estate
May 19, 2009 03:04 AM #127
Joanne O'Donnell
Chic Home Interiors - Oakland, CA

Jeff, wow, amazing how things can go through these kind of changes this quickly.  As always thanks for keeping us up on what is the most current and correct mortgage info!

May 20, 2009 12:29 AM #128
Jack Sprague
Keller Williams Preferred Realty - Lakeville, MN

Jeff...Thank you for your timely blogging.  I was in the middle of updating First-time Homebuyer Info on my website, when I came across your comments about the rescinding.  I had just been to the HUD site where the latest press release dated 5/29 with the headline about Donovan's announcement, "RECOVERY ACT'S HOMEBUYER TAX CREDIT CAN IMMEDIATELY HELP THOUSANDS OF FIRST-TIME HOMEBUYERS TO BUY A HOME".  I also went to and didn't find any info to the contrary.  BTW, the link from Pat & Wayne doesn't work:

Jun 03, 2009 12:58 PM #129
Pat & Wayne Harriman
Harriman Real Estate, LLC (203) 672-4499 - Wallingford, CT
Broker/Owners, Wallingford CT Real Estate

Jack, it worked when it first came out, or obviously I wouldn't have posted it, so my bad and thx for pointing it out. Anyway, it's irrelevant now with HUD's new announcement.

Jun 03, 2009 01:30 PM #130

There is a "First Time Home Buyer Tax Credit" up to $8,000.  Why don't they allow people who are having trouble making their mortgage payments, due to job loss, loss of hours or other economic conditions, and use this same tax credit to help subsidize their mortgage payments?  This would save $Millions$ in Foreclosure costs .....

Jun 10, 2009 04:55 AM #131
Bob Wilson - San Diego, CA

Its amazing to me how many agent and lender sites I see with the wrong info on the tax credit.

Jul 18, 2009 04:47 AM #132
Angela Niece
REMAX Results - Eden Prairie, MN

The government plays in area's that they do not understand.  I would bet that most of the advice that congress gets is from agents that are selling upper end property.  This really ruins the ability for good legislation to be written for the average homeowner and first time home buyer.

If congress really wanted to do the correct thing, they would spend time on the street with agents that work with first time homebuyers.

Oct 23, 2009 03:46 AM #133
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