The FHA is finalizing plans that will allow first-time homebuyers to use the $8,000 tax credit passed by Congress this winter as a down payment for purchasing a home with FHA financing.
In essence, what FHA is trying to accomplish is to help first-time homebuyers get into a home by using the credit to cover the 3.5 percent down payment required for an FHA loan rather than requiring the buyer to have the down payment at time of closing and receiving the credit after the fact.
There still are gaps I’m trying to fill in. For example, the Wall Street Journal says lenders will provide what amounts to a bridge loan – a short-term loan – for the down payment and then that loan will be paid back with the credit.
Except this is a tax credit and not a rebate, so it’s conceivable based on whatever else a buyer has going tax-wise that the buyer may not be receiving the full $8,000 back from the IRS in the form of a check. So where would they get the money back to pay back this loan?
When I have an answer, I’ll pass it along.
It’s also interesting to note FHA was instrumental in banning third-party non-profits such as Ameridream from providing down payment assistance yet that’s exactly the business they’re getting into. But since I was a fan of Ameridream, I can’t complain.
UPDATE: Within minutes of posting this the word started trickling out that the FHA letter authorizing these bridge loans no longer is posted and the program has faded out of existence in barely a day. My apologies for the incorrect information; it was right as of the moment I hit publish and changed almost immediately thereafter.
[tags]Phoenix real estate, homebuyer tax credit[/tags]