"FACTS AND FICTION OF THE $8,000 TAX CREDIT"

By
Real Estate Agent with DeCoursey Real Estate Group

"FACTS AND FICTION OF THE $8,000 TAX CREDIT"

I have fielded many questions in the past few weeks about using the first time homebuyer's tax credit of $8,000 for different purposes.

IT COMES DOWN TO THIS:  Today, you cannot use this $8,000 tax credit for the required down payment of 3.5% on an FHA loan.

HUD originally put out a mortgagee letter on May 12th saying this was allowed.   Then it was rescinded the next day.

This past week they put out a new letter.     This one states that you can receive the first time homebuyer's tax credit up-front, but not through the IRS.    You cannot receive your $8,000 tax credit before you close on your home.    This has been confirmed thru the IRS.  

To read the full contents of the letter, copy and paste this link:

http://portal.hud.gov/pls/portal/docs/PAGE/FHA_HOME/LENDERS/MORTGAGEE_LETTERS/2009_MORTGAGEE_LETTERS/09-ML-15%20USING%20FIRST-TIME%20HOMEBUYER%20TAX%20CREDITS.PDF

The money can be given to you as a second mortgage from any Federal, State, or local agencies, and any FHA mortgagee or any FHA approved nonprofit organization.    Just like the Nevada Bond Program works.

So you can get an advance, or a loan, from one of these approved parties.  

You can use this advance it to increase your down payment from the minimum 3.5% required or to help you with closing costs.  You cannot use it for the minimum 3.5% down payment.   You still have to come up with the 3.5% yourself.

The challenge today to this new mortgagee letter is that the banks haven't yet decided how to execute this.    We, here at Bank of America, expect to have some guidance in the very near future.  

In the meantime, nothing has changed.   Today, you can't use the tax credit at all on your FHA loan.   However, stay tuned. 
 
This was great information sent to me by my lender.

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