$8000 Tax Credit Can Be Used for Down Payment
Federal Housing Administration is going to permit its lenders to allow home buyers to use the $8,000 tax credit as a down payment. Previously, most buyers wouldn’t receive the funds until after they filed their tax return.
FHA’s approved lenders will now be permitted to “monetize” the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.
On May 12th the secretary of the U.S. Department of Housing and Urban Development announced:
“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”
UPDATE: Not so fast! Looks like we won’t see these changes quite as soon (see John’s comments – in the comments section). It appears that authorization for bridge-loans may be limited to states in which the state housing finance agency already has a tax credit bridge-loan program in place. It also remains unclear if if lenders will accept loans under new guidelines. We have seen several cases where lenders adopt underwriting guidelines that are more conservative than what HUD allows. For example HUD allows credit scores as low as 580 while most lenders now have a 620 minimum score. We also know that HUD used to allow sellers to pay the buyers down payment via the Nehemiah or AmeriDream programs and these loans had nearly three times the default rates as compared with loans where the buyer paid their own down payment.
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