New Ruling on $8000 Tax Credit for 1st Time Buyers

WASHINGTON (MarketWatch) -- Federal Housing Administration-approved lenders can now provide short-term loans to first-time borrowers eligible for the $8,000 home buyer tax credit.

But under guidance issued by the Department of Housing and Urban Development late last week, the loans must be on top of -- not instead of -- the minimum 3.5% down payment normally required on FHA-insured loans.

Houses still not priced to sellOne out of every four homes on the market has experienced a price reduction, but when you look at the discounts, sellers still are loath to lower their asking prices, a Trulia.com study says. Jonathan Burton reports.
Buyers can still receive down-payment assistance from their parents, employers, nonprofit groups and certain government entities. But other than that, the down payment must come from their own funds. See previous Realty Q&A.

Thus, FHA borrowers relying on the lender to finance the tax credit will have to come up with their own money for the 3.5% down payment. But after that, they can use the proceeds from the short-term loans to increase their down payments, cover their closing costs or buy-down their mortgage rate.

The rules for advancing the tax credit from a refund received weeks or even months after an eligible buyer files a tax return to cash at the settlement table were announced by HUD. Secretary Shaun Donovan, who said allowing buyers to take advantage of the credit right away is "a real win for everyone."

HomeQuest has been an approved FHA lender since 1996. Please call me at 714-478-3153 if you have questions on this announcement or any lending related questions.