It has just been announced that first time home buyers can use the $8000 tax credit to pay down their interest rate and closing costs on an FHA loan. FHA loans are great for buyers who do not have the required 10-20% down payment money to buy a home. With FHA, a qualified buyer can purchase a home with 3.5% down. FHA loans all but disappeared in the seller boom years due to the birth of the 100% financing programs (the same programs that required no proof of income, no worries about credit scores, and caused the real estate crash we are dealing with today) FHA programs are insured, therefore a much safer bet for lenders, therefore they are willing to deal with the 3.5% down payment. (It’s back to qualifying buyers as in the “old days”, but you know what, banks never should have strayed from what worked anyway) We are seeing a lot of FHA financing in today’s market.
This is great news! First time home buyers can basically get an “advance” on the $8000, meaning they don’t have to wait until next tax season to claim their money. A first time home buyer can use this money at the time of closing to pay for closing costs and buy down their interest rate. So if the interest rate is 5.5%, they can apply some of the money to get a 5% rate instead. Now, at closing, there will be a lien put on the property, and when the buyer does their taxes for 2009, they will need to use the credit to pay back the advance they received. Here is a link to the HUD tax credit announcement on the HUD website.
This is great news for the real estate market! According to estimates by the National Association of Home Builders, the Administration’s home buyer 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. Given FHA’s current market share, it’s estimated that thousands of families will be able to purchase a home by allowing the anticipated tax credit to be applied toward their purchase together with an FHA-insured mortgage.
By the way, even of you had purchased a home in the past, you may still be considered a first time home buyer! If you have not purchased or owned a home in the past three years, you will most likely qualify!
Want more info? Interested in taking advantage of these programs? Contact me