HUD Action Allows Home Buyers To Use $8,000 Tax Credit For Downpayments On FHA-Insured Loans

May 13, 2009 - HUD Secretary Shaun Donovan’s decision to allow consumers to use the $8,000 first-time home buyer tax credit to help cover their downpayment and closing costs on FHA-insured mortgages will be a big boost to the housing market, according to the National Association of Home Builders (NAHB).

“The biggest obstacle for first-time buyers is coming up with a downpayment,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “We commend Secretary Donovan for acting decisively to enable buyers to access the tax credit at the time of closing. This will help to stimulate home sales, stabilize housing and get the economy back on track.”

The measures announced by HUD would allow FHA-approved lenders; federal, state and local government agencies; and FHA-approved non-profit organizations to supply home buyers short-term or “bridge loans” up to the amount of the $8,000 first-time home buyer tax credit.

Longer term loans secured by second liens can also be used by government agencies and FHA-approved non-profit organizations to facilitate home sales. Several state housing finance agencies have introduced such programs and a number of agencies are considering that possibility.

More information about these programs can be found on the National Council of State Housing Agencies Web site at www.ncsha.org/section.cfm/3/34/2920.

Previously, the home buye r would have been unable to access the tax credit until they filed their next annual tax return or an amended 2008 tax return and received the refund from the IRS.

Robson and others NAHB leaders discussed this matter and other housing-related issues with Secretary Donovan last week.

“Secretary Donovan shares our view on the need for a housing and economic recovery,” said Robson. “We appreciate his leadership in moving swiftly to help first-time home buyers to access the tax credit up-front at the time of closing. The timing could not have been better as we are in the midst of the crucial spring home buying season.”

The next step is to see how FHA-approved lenders use HUD’s new guidelines to actually monetize the tax credit for first-time home buyers and structure the payback provisions o f the loans. NAHB encourages lenders to act promptly to put these provisions into place.

To qualify for the tax credit, first-time home buyers must actually close on their home purchase by Dec. 1, 2009. Buyers can take the credit on their 2008 or 2009 income tax return.

For further information about the tax credit – including a detailed question and answer section and a number of home-buying resources for consumers – log on to NAHB’s consumer Web site at www.federalhousingtaxcredit.com. A Spanish version is also available to provide detailed information on the tax credit to Spanish-speaking first-time home buyers.

The Perfect Time to Buy a Home!

WashingtonBizJournals.com reported the following in February, 2009...

“A new real estate value survey from real estate data service Zillow.com says American homeowners saw $3.3 trillion erased from the value of their real estate in 2008.”

They went on to say...

“In the Washington area, median home values fell 14.8 percent in 2008 to $334,443. In the Baltimore market median home values dropped 10 percent to $258,263.”

Sounds like bad news, doesn’t it? Well, if you are a homeowner who must sell now and you don’t have plans to move up to a more expensive home, this is bad news.

The good news is if you’re purchasing a home right now, I’ve got five great reasons you should make your move...

1. HOMES ARE ON SALE... They’re actually on CLEARANCE... The lowest prices we’ve seen in years! We’ve seen “Fast-dropping interest rates and the most affordable homes in more than three decades...” according to a report released Tuesday by the National Association of Realtors.


2. Pair that with the amazing interest rates that are available today – somewhere in the 5% neighborhood – and you’re CRAZY to be renting! Here’s how I see it: Renting = paying off someone else’s mortgage for them. Why would you?


3. There are a lot of homes from which to choose! In the real estate industry, we call this a lot of ‘inventory’ Lots of inventory + few buyers = a buyers market!


4. One of the greatest myths today is that you must have a 20% down payment in order to buy today. WRONG! Guess what? More good news…FHA loans only require at 3.5% down payment right now. Yes, you will have to pay MIP (Mortgage Insurance Premium) but that is only about 1%, and it’s part of your monthly payment.


5. Here’s the icing on the cake! Most sellers will pay your closing costs for you!

If you are still frightened by the thought of purchasing a home, consider these wise words from the world’s wealthiest man, Warren Buffett. In a shareholders meeting in 1986 he explained one of his rules for smart living and savvy investing: “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

So, go ahead and get started on your path to prosperity. Be bold and grab this opportunity before the market turns around and you’re caught up in the frenzy of all the other buyers who’ve been waiting for the market to “bottom out.”