First Time Homebuyer Tax Credit Can Be Used As The Downpayment For FHA Loans?
This could be HUGE! Saving for the downpayment to buy a home can be one of the biggest struggles for those who have decent credit, provable income and little or no savings. “Zero Down” is one of the concepts that got us into trouble in the first place during the bubble days, but this is different. This is stimulus money being put to good use as a down payment instead of being received after the closing.
Yesterday at the National Association of Realtors mid year conference, Shaun Donahue, The HUD Secretary announce that they will be allowing the First Time Home Buyer Tax Credit to be used as a down payment.
“We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a down payment,” Donovan said.
HousingWire.com describes the process:
Home buyers qualifying for Federal Housing Administration-insured mortgages may soon use the new first-time home buyer $8,000 tax credit as a down payment, US Department of Housing and Urban Development secretary Shaun Donovan said today.
The process of applying the tax credit toward down payment, called ‘monetization’ in the industry, allows for FHA-qualified borrowers to use the tax credit to obtain a government-insured mortgage.
Donovan’s announcement came at a National Association of Realtors legislative summit this morning, although HUD’s details on the initiative aren’t scheduled for official release until next week. The initiative will allow FHA-approved lenders to monetize the tax credit through short-term bridge loans, letting borrowers access the funds at the closing table.
This could change the home buying time schedule for a lot of first timers who are currently saving up a downpayment. We’ll have to wait till next week until they release the details. In the meanwhile, don’t stop squirreling away your money. Even if you can buy for what’s essentially zero down, you’ll still want to have as much money as you can for the fix up, redecorating or what have you that comes with home ownership.