Comments on: First Time Home Buyer Tax Credit As A Down Payment?

By: Cheap Mortgages

Cheap Mortgages — Fri, 12 Feb 2010 10:25:11 +0000

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By: David Home Inspection

David Home Inspection — Wed, 05 Aug 2009 17:50:12 +0000

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Founder of
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By: rerockstar

rerockstar — Thu, 02 Jul 2009 16:30:48 +0000

Apryl,

It is up to the lender to have a program to monetize the tax credit. In other words, if the lender doesn’t have a program in place to provide you with the loan against your tax credit, they can’t count it towards your closing costs. For example, none of the lenders I work closely with have created a program to use the tax credit in this way – therefore the whole idea of it being using towards closing costs is useless to most of my clients.

Check with your lender to see if they have a program in place to make these sorts of bridge loans…if you’re lender is investigating, they probably don’t have one in place.

Thanks for stopping by.

By: Apryl

Apryl — Thu, 02 Jul 2009 15:37:39 +0000

Oh wow. Thank you so much for this information. This took some doing to find. No one knows anything, it seems, about this. Our lender is investigating. It is really frustrating. Does the lender have the option to not allow the credit to go towards our closing costs?

By: rerockstar

rerockstar — Mon, 22 Jun 2009 19:13:01 +0000

Tyler – That’s been the problem with it so far that I’ve seen. I don’t know of any lenders that have jumped on this yet. For them, according to one of my friends in the lending industry, is that there is little gain and more work for them to do this, so it winds up being not worth it to them.

FHA doesn’t give the money (or actually loan the money for an FHA loan either). It would be a lender of the buyer’s choosing who would give you the bridge loan. All FHA does is insure the loan for the lender.

The term “FHA loan” is actually a misnomer, the term is actually “FHA-insured loan.”

Thanks for adding your comments and questions.

By: Tyler

Tyler — Mon, 22 Jun 2009 18:53:07 +0000

The deatils are pretty simple. Cannot be used as down payment, can be used towards closing costs.

The real question… Has anyone actaully done this? Where do you get the money? It has to come from someplace. FHA is not doing it, or not taking part in the program. Thoughts????

By: rerockstar

rerockstar — Thu, 11 Jun 2009 04:14:29 +0000

Stephanie – The 3.5% down payment is still required to be paid (without using the tax credit based bridge loan). This plan only applies to FHA-insured loans as well – so no conventional, VA, or seller financing allowed.

For example, let’s suppose you qualify for the full credit and owe $0 to the IRS when you file your taxes. You’re buying a $100,000 house.

You would need to come up with $3,500 (3.5%) and qualify for a FHA-insured loan. If the lender had a program to monetize the tax credit, you could borrow up to $8,000 (the max tax credit) from the lender and apply that money to either your closing costs or additional down payment.

If you were to use the entire loan of the tax credit for down payment you would essentially be putting 11.5% down (3.5% your cash, 8% ($8,000) of the loaned tax credit money).

In most cases I would have the buyer speak to an outside source – a trusted lender or some with loan experience. You need to look at the balance between the extra down payment/closing cost advantages and the cost to you for the temporary loan (interest, fees, etc.). One may be more advantageous than the other.

Hope that helps! Thanks for stopping by and if you have more questions, just let me know.

By: stephanie

stephanie — Wed, 10 Jun 2009 22:10:36 +0000

Though it cannot be in lieu of a down payment, but only as additional down payment, does this mean that you still have to have 3.5% down payment upfront, or is that decreased? a smaller amount plus what you take from the credit?

By: Twitted by rerockstar

Twitted by rerockstar — Mon, 01 Jun 2009 09:29:08 +0000

[...] This post was Twitted by rerockstar – Real-url.org [...]
Sorry… forgot to say great post – can’t wait to read your next one!

By: Twitted by rerockstar

Twitted by rerockstar — Sun, 31 May 2009 13:31:52 +0000

[...] This post was Twitted by rerockstar – Real-url.org [...]