On May 29th, 2009 HUD/FHA announced the terms of the first time homebuyer tax credit and its use as a down payment assistance program
. Read the entire HUD Mortgagee Letter 2009-15 by clicking on the HUD logo off to the right. Reader Beware, like many other ML's, you must be a lawer to dissect this information!
As we already know, Secretary Shaun Donovan released this information prematurely early this year at a National Association of Realtors summit. You may read this article for yourself. This Mortgagee Letter 2009-15 was quickly rescinded as Donovan did not check with the Offices of Management & Budget Officials prior to releasing the information. Ooops!
HUD finally has released the details of how a first time homebuyer may use their tax credit as a down payment!
Yay, jump for joy, right? Not so fast, like many of the other government programs, (cough) Hope for Homeowners, HUD's attempt to assist buyers has fell short once again.
There is two ways you may receive the first time homebuyer tax credit upfront and use it as part of your down payment on a FHA loan.
Option #1 Secondary Financing
This one is rocket science, HUD actually already allows eligible government agencies and instrumentalities of government to offer seco
nd lien's to be used as a down payment and closing cost. So what was the point of putting this in the letter? Considering if you read the last condition of the secondary financing, "The secondary financing may not require a balloon payment before ten years." So, if no balloon payment is allowed, then how would the agencies collect on the $8000 first time buyer tax credit. There is far too much risk for non-profit, government agency to issue a second mortgage based off the receipt of an $8000 tax credit that they can not require to be paid off right away.
Option #2 Purchase of Tax Credit
This options simply doesn't matter as ML 2009-15 clearly states that the funds derived from the sale of the tax credit can not be used as part of the 3.5% required minimum down payment on FHA loans. It may only cover an additional down payment, cost of buy down, and or closing cost. Now, if I'm a first time home buyer, why would I request my tax credit up front just to pay for my closing cost when I could ask the seller to pay up to 6% of the purchase price towards my closing cost on a FHA loan. I would rather keep that $8000 tax credit in my pocket and utilize the full benefits of FHA financing.
Summary: Another fantastic flop by HUD! Why announce that you will allow a tax credit to be used as down payment assistance when in fact it can not be used for your minimum contribution of 3.5%. The real funny part, government is trying to eliminate mortgage brokers through HR 1728 because there thoughts are that brokers were manipulative and misleading. Talk about the pot calling the kettle black!
Joshua Lerette - The Tampa Bay Mortgage Pro
Innovative Mortgage Services, Inc.
(P) 727-488-7355
josh@TheTBMortgagePro.com
www.TheTBMortgagePro.com
Joshua Lerette, The Tampa Bay Mortgage Pro, is a mortgage specialist in St. Petersburg, Florida providing financing solutions for homeowners and homebuyers alike. The Tampa Bay Mortgage Pro specializes in First Time Homebuyer programs utilizing FHA, VA, and the USDA Rural Housing Loan.
Comments(0)