Tweaks to the First Time Home Buyer $8,000 Tax Credit

Yesterday the U. S. Department of Housing (HUD) issued a press release clarifying the status of the up to $8,000 federal tax credit in use with Federal Housing Administration (FHA) loans.

Here are some of the new guidelines for homeowners using the $8,000 tax credit:

• State Housing Finance Agencies and certain non-profits can "monetize" the tax credit up to the full amount of the tax credit (depending on the amount of the mortgage) to allow borrowers to immediately (rather than waiting for their federal tax refund check) apply the funds toward their down payments.

• Buyers financing through these state and non-profit organizations will be able to use the tax credit for their down payments via a short-term loan provided by the HFA or non-profit. In addition to the borrower’s own cash investment, FHA allows parents, employers and other governmental entities to contribute towards the down payment. (Remember that individuals can gift up to $13,000 per person per year tax-free.)

• Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5% of appraised value or their closing costs, which can help buyers achieve a lower interest rate. Buyers cannot use the tax credit amount as part of their 3.5% down payment, but can use any or all of the funds as additional down payment.

In light of these changes, what does this mean for the first-time buyers you are working with? The news is brand new – have you told them yet through your many marketing methods?

In addition, the National Association of Home Builders predicts that the tax credit will fuel 160,000 home sales in the U. S. What portion of the 160K homes that are sold by November 30 will you have a part in?

Remember the date: the first time home buyer tax credit applies to purchases closed/settled on or before November 30, 2009. Don’t lose the opportunity to inform your buyers and get their business before time runs out for this federal tax credit.