Note: This is something that has not yet happened, but may soon happen. I originally posted this information about the 8000 tax credit being used as a down payment on my main site, and thought it was relevant enough to share with everyone as to what may soon be around the corner. Remember, to my knowledge, this is not yet official, and we will be sure to bring you updates if/when it becomes official.
But it appears as if it might be just around the corner… stay tuned for any forthcoming announcement.
Dean’s notes: I have my own thoughts on this which you can read towards the end of this post. I would love to hear your thoughts. My thoughts were developed after conversations with other agents today. All I will say is the other agents did not agree with me so I thought I would share them here.
Can you use the 8000 tax credit as a down payment for your home?
Not today, but soon you may be able to.
Yesterday, Secretary of Housing and Urban Development Shaun Donovan gave a prepared speech at the National Association of Realtors Real Estate Summit. He said something that was a possible hint as to things to come when he mentioned that FHA was currently working on a proposal that may involve people being able to use the 8000 tax credit as a down payment.
An excerpt from that speech regarding FHA’s position on the 8000 tax credit being used as a down payment:
And we are taking action to further help the housing market recover. I’m excited to announce here at NAR that FHA’s policy on the “monetization” of the first-time homebuyer tax credit will soon be published. I know that you’ve been waiting anxiously to hear FHA’s position on the matter. We, like you, believe that this new tax credit is not only a tremendous opportunity for first-time homebuyers, but also an enormous benefit for communities struggling to deal with an oversupply of housing. According to estimates by the National Association of Home Builders, this new tax credit will stimulate 160,000 home sales across the nation – 101,000 of which will be first time buyers who will receive the credit. Another 59,000 existing homeowners will be able to buy another home because a first time buyer purchased their home.
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 downpayment. So FHA will permit trusted FHA-approved lenders and HUD-approved nonprofits, as well as state and local governmental entities to “monetize” the tax credit through short-term bridge loans. We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit. FHA will be publishing the details shortly.
Enabling first time homebuyers to use the 8000 tax credit as a down payment would be a big win for the market – it would allow many more people to move into a home who currently may not have enough for a down payment.
Certainly, if FHA decides to allow homeowners use the 8000 tax credit as their downpayment in some form, this will help our market. We will be sure to keep you updated with any more developments on this story.
(h/t Mark Madsen at MyFHAMortgageBlog for sharing the video about the 8000 tax credit being used as a down payment and the guys at ThinkBigWorkSmall)
Dean’s thoughts: I’m not saying that using the tax credit for a down payment is a bad thing, I think putting down as much money as you can on a home is a good idea. If you need the $8,000 for your down payment because you cannot afford the 3.5% down and the closing costs, then maybe the best thing for you to do right now is hold off on buying that home. It is a great time to buy, but prices will more than likely not be much different in a year than they are now. Start saving, and if you cannot save then home ownership may not be the best thing for you at this time.
Justin McHood is a nationally published mortgage expert who lives and works right here in Arizona. You will normally find him wearing a blue starched shirt (he says that it goes well with is orange hair) and you can learn more about him at ArizonaMortgageTeam.com
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I know from the questions we receive that many first-time buyers lack the typical down payment needed to buy. So this effort will go a long way toward spurring the housing market. It will be interesting to see what happens with the number of FHA loan apps over the next few months. Great info and post.