Over the last several weeks HUD, along with FHA, have been back and forth as to the legality of whether or not they would allow the use of the $8000 First time home buyers Tax Credit to be used as part of the down payment and closing costs of a qualified purchase.
Well now we have an answer. Yes! You can cash in your $8000 instant rebate at the register!
There are some rules that need to be followed, so if you want this credit instantly applied to your purchase transaction, you need to make sure that your lender follows the specific steps that are outlined in HUD letter to Mortgagee's dated May 29. I have posted a copy of this letter here for you to review.
The letter outlines 2 ways that you can apply the credit. You can either get secondary financing from an FHA eligible agency such as a non-profit organization or State Govt Agency or you can sell your tax credit and get a cash advance from an approved FHA non-profit organization or Govt Agency.
So while HUD has made provisions to instantly cash in on this money, you still have to take several steps to qualify with an approved agency that can provide you with the $8000 before your close of escrow date.
I realize that many borrowers want to cash in on this immediately, but it raises some interesting questions. Look at it this way, If a seller knows that the buyer is going to instantly cash in on $8000 will this affect the barganing table? Think about it? Will a seller really be willing to pay more in buyers closing costs if they know that the buyer is receivng $8000 to assist in the transaction?
While I think that HUD's announcement is a good thing for some borrowers, it is certainly not something for everyone and needs to be carefully evaluated by your Realtor and Mortgage lender. If you want to know how to tilt the tables for your advantage, call me at SCV Loan Solutions, we'll be happy to help you assess your situation.