Uncle Sam to allow use of $8000 tax credit as down payment.

We're still gathering details on this announcement but below is a release out today. We should know more in the next week. But this is an exciting develpoment for Reno Sparks home buyers. 

FHA Preps Tax Credit for Down Payment Use

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.

“We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment,” Donovan said, according to NAR.

The tax credit arrived as part of the American Recovery and Reinvestment Act of 2009 for qualifying taxpayers that buy homes in 2009. The law states that qualifying home buyers may claim up to $8,000 — or $4,000 for married individuals filing separately — on either their 2008 or 2009 tax returns. Unlike the previous law — which required recipients of the tax credit to repay the funds over a number of years without interest — the new home buyer credit effective with the passage of the act does not have to be repaid.

Comments

[Brandon]

Great job keeping your readers up to speed on this. I think this will go a long way toward bringing more first-time buyers into the market. I've heard some more recent rumors that HUD is reversing their position on this, and that they actually won't allow the tax credit for down payment use. Have you heard anything about that? There's so much misinformation right now.

[ryan]

The Secretary of HUD stated at the NAR Real Estate Summit last Tuesday that FHA is going to permit its lenders to allow homeowners to use the $8,000 tax credit as a downpayment. We now learned that HUD removed this information and pulled Mortgagee Letter 2009-15 from their website so the remarks by Secretary Donovan may have been premature.