Thursday, June 4, 2009

$8,000 NOT Available for Down Payment (But It Can Be Used for Closing Costs)

Doesn't inspire much confidence in our government when they keep announcing stuff and then retracting their announcements, does it?

This is from the National Association of Realtors:

HUD: Tax Credit Can Be Used on Closing Costs

FHA-approved lenders received the go-ahead to develop bridge-loan products that enable first-time buyers to use the benefits of the federal tax credit upfront, according to eagerly awaited guidance from the U.S. Department of Housing and Urban Development on so-called home buyer tax credit loans that was released today.

Under the guidance, FHA-approved lenders can develop bridge loans that home buyers can use to help cover their closing costs, buy down their interest rate, or put down more than the minimum 3.5 percent.

The loans can't be used for the borrower's minimum investment of 3.5 percent of the sale price, senior HUD officials told reporters on a conference call Friday morning.

Thus, buyers applying for FHA-backed financing with an FHA-approved lender that offers a bridge-loan program can get a bridge loan to bring down the upfront costs of buying a home significantly but would still have to come up with the minimum contribution of the 3.5 percent downpayment.

The first-time homebuyer tax credit was enacted last year--and improved upon earlier this year--to help encourage households to enter the housing market while interest rates are low and affordability is high. The credit is worth up to $8,000 (10% of the purchase price, so as long as you pay over $80,000 for your house, you get the whole $8,000) and is available to households that haven't owned a home in at least three years. The credit does not have to be repaid, and is fully reimbursable, so households can get their credit returned to them in the form of a payment. This means if you don't owe $8,000 in federal taxes, you get the difference between $8,000 and your federal tax obligation as a cash refund!

Learn more about the credit, including how to apply for it this year even if you've already filed your taxes, at

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