US Secretary of Housing and Urban Development Shaun Donovan announced Friday that the Federal Housing Administration (FHA) will allow homebuyers to apply the new homebuyer tax credit for first-time $8,000 from the Obama Administration toward the purchase costs of an FHA-insured home. Donovan made the remarks before the Spring Board of Directors of the National Association of Home Builders, stating that this action will help stabilize the nation’s real estate market by stimulating home sales across the country.
Pursuant to the American Recovery and Reinvestment Act of 2009, first-time homebuyers are offered a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. Friday’s announcement detailed the various rules that regulate the access of state Housing Finance Agencies and some non-profit organizations to financing, up to the maximum amount (depending on the amount of the mortgage) for which borrowers can apply. immediately apply these monies to your initial payments. If the buyer uses an FHA-approved lender, this credit can be applied to the down payment in excess of the required 3.5% of the appraised value OR closing costs. This can lead to achieving a lower interest rate.
Donovan stated, “…What we’re doing today will not only help these families buy their first home, but it will also be of tremendous benefit to communities struggling to deal with an oversupply of homes.”
Current law did not allow approved lenders to “monetize” the tax credit to meet the required 3.5% minimum down payment, but under the terms of Friday’s announcement, lenders can now monetize the tax credit for use as a down payment. additional or other closing costs, which can help achieve a lower interest rate.
In addition to the borrower’s own cash investment, FHA allows parents, employers, and other government entities to contribute toward a down payment. Unlike seller-financed down payment assistance, which has been easily abused, this program will allow homebuyers to shop for the best home price and amenities using the advance tax credit.
Estimates offered by the National Association of Home Builders are 160,000 home sales that can be made nationwide; 101,000 of these will be first-time buyers receiving the credit. Another 59,000 existing homeowners will be able to purchase another home because their home was purchased by a first-time homebuyer. Based on the current FHA market share, it is estimated that thousands of families will be able to purchase a home using a combination of the tax credit and an FHA-insured mortgage.
Homebuyers should be careful when comparing benefits and costs when seeking tax credit monetization services. Lenders should know that the government is now more vigilant about possible mortgage scams. For each FHA borrower who receives assistance through the tax credit program, FHA will collect the name and tax identification number of the provider organization, as well as associated fees and charges. FHA will use the information to closely monitor the business and refer any questionable practices to the appropriate regulatory agency, as necessary.
