Using First-Time Homebuyer Tax Credits for the Downpayment - It's GONE !!!! - The story of the $8,000 tax credit

Reblogger Sheldon Neal
Real Estate Agent with Bergen County, NJ - RE/MAX Real Estate Limited

Well Folks - HUD giveth, and HUD taketh away

It seems that as of right now, HUD has pulled the ability to use the $8K credit for a downpmt, and those who have used it for this purpose to this point, may just have been the lucky ones.

Fortunately, we have partners on A|R like Jeff Belonger who was able to get to the bottom of today's developments on this subject.

Hopefully this program - or something similar - will be available soon for those First Time Buyers who could really use it.

Thanks to Jeff for his diligent research, and sorry to all those peeps who were hoping to take advantage of the currently rescinded '$8K advance for downpayment' ...

Sheesh, my head is spinning ...

Original content by Jeff Belonger

gone diving - fishing

 

The $8,000 first time homebuyers TAX CREDIT - HUD has saved the day. Well, okay, it saved it for a day. It's gone now, recinded, at least for now. Everything that you have been reading about yesterday, about FHA/HUD putting out mortgagee letter 2009-15, it's no longer there. Tom Burris had noticed this yesterday and I just got off the phone this morning with the HUD office. For reasons unknown, this letter, ML 09-15, has been taken off the self. Besides, I have my reasons to this and also felt that many of the blogs posted yesterday were incorrect. Here is why....

 

 

 

fha loans & fha mortgages

 

In regards to FHA loans, a borrower can only obtain monies for their actual downpayment of 3.5% by the following :

  • Their own funds
  • up to 100% of a gift from a relative/family member
  • From the Federal, state, and local governmental agencies and nonprofit instrumentalities of government
  • FHA approved non-profits 
  • monies from their employer in a form of employee contribution
  • monies from secured borrowed funds... IE. borrowing equity from your home to buy another home or borrowing against your car that is free and clear or borrowing from your 401-k, etc, etc

 

 

 

Here is the major confusion that was put out yesterday both HUD, NAR, and many realtors and loan officers that wrote about this.  In the body of the mortgagee letter, ML 09-15, at the bottom, it stated :

The Tax Credit: Short-Term Loan: 

Entities that can offer the tax credit advance with short-term loans:

  • Federal, state, and local governmental agencies and nonprofit instrumentalities of government, FHA-approved nonprofits, and FHA-approved mortgagees may provide short-term or "bridge loans" secured only by the anticipated tax credit due the homebuyer as collateral.

 

The confusion : It states, As collateral and not as a secured lien against the home, but as a secured loan against the collateral. Which in this case would be the $8,000 tax credit, which would be secured against.

Because of this, HUD does not allow for monies to be borrowed or given to in any form that I did not mention above, to be used for the down payment.  The reality of it all, basically everything that was stated in the mortgagee letter, that has been revoked for now, is old school FHA. When it comes to FHA loans / FHA mortgages, you could get monies for your down payment from the items that mentioned above, which is mentioned in the mortgagee letter.  Well, was mentioned...  One caveat to all of this is that HUD was going to allow for lenders to secure a short term loan or bridge loan against the $8,000 to be used to purchase a home. But again, that can't be used for the actual down payment, because it goes against the basic FHA guidelines of downpayment monies of 3.5%. Now, unless HUD changed this, it does not clearly state this in the mortgagee letter, even though that letter is no longer valid.

 

 

Summary : When I read the ML 09-15 the other day, all of this jumped into my head. But I didn't have time to dissect all of this, yet I wanted to get this out to the public. After seeing many blogs written with inaccurate information, because NAR stated certain things from a HUD spokesperson, it was never clear, in which this gave me large goose pumps. My advice, consult an FHA Expert, even if you hear it from others that are high up, such as the NAR. And be careful on those that call themselves Experts also. I personally think that this was immature of several agencies for putting this information out there without verifying it's accuracy and intentions. And I would have to assume that HUD feels the same way since they took this mortgagee letter off their site and off the HUD clips site.  Thanks

 

 

 

EXTREMELY IMPORTANT REMINDER : Just because HUD or any other source puts information out there, doesn't mean it will happen. Keep in mind that most lenders have overlays and can add to certain rules and or guidelines.   

 

And just for the fact that HUD says it's fraud to obtain the tax credit prior to closing. This question has been asked to HUD by many of us and their response is FRAUD.  Why?  You are receiving the monies before you are buying the house. Yes, you can give the IRS the address prior and a potential closing date. But I smell shit hitting the fan very soon, since a lot of this is still new. And remember those lender overlays?  I know some lenders and underwriters that won't allow this type of loan to go to closing.

 

Ken Cook wrote a very short and brief blog about all of this. It's very clear. FALSE info flying around about the first time tax credit used as a downpayment.

 

 

For real, updated information on the First time Homebuyer's Tax Credit, please read :  $8,000 first time homebuyers tax credit.

 

 

 

follow Jeff Belonger on Twitter

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- Mortgages -

 

Experience & Knowledge at its BEST !!!

 

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Copyright © 2009 by Jeff Belonger

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Show All Comments
Rainmaker
75,960
Tom Thornton
Broker Associate, MBA, ABR, CRS, GRI, EcoBroker
Realty Austin

Thanks for mentioning this - I was planning to send emails to a number of clients over the weekend letting them know...and now I won't. So it goes.

May 15, 2009 09:26 AM
Rainmaker
996,888
Karen Fiddler, Broker/Realtor
Laguna Beach & Lake Arrowhead, CA (949)510-2395
HOM Sotheby's Intl Realty, 949-510-2395

Just another example of the current federal "government" making every possible effort to ruin the economy.

May 15, 2009 09:30 AM
Anonymous #18
Anonymous
Anonymous

The idea was interesting, but I held off announcing it to clients or Realtors because the logistics didn't make sense.  They just clamped down on "seller funded" DPA last year as being too risky... this would likely be viewed the same way.

It can be done right.  Look at VA and USDA, both 100% financing programs.  There are people that have great debt/income ratios, credit and stable rent histories for about the same amount they would pay for a home.  Some even have 3-5% of the home price saved, but they don't want to use their emergency savings on a down payment.  If properly underwritten with an eye on risks it can be done.

Given to anyone without regard to credit history, income or other factors (like was done a few years ago) is a disaster.  But HUD and Congress has made it clear they don't want 100% financing for FHA.  By the time they figure this out, the $8000 tax credit will have expired... only 6 months to go!

May 15, 2009 09:31 AM
Rainmaker
85,770
Sheri Moritz
Wake Co. NC REALTOR Apex to Raleigh to Wake Forest
Next Home Team

Great post Sheldon and excellent information.  I will keep you posted on what we find out.

May 15, 2009 09:49 AM
Rainmaker
807,814
Lyn Sims
Schaumburg Homes
RE/MAX Suburban - Schaumburg IL Real Estate - Northwest Suburbs of Chicago

I thought I just saw you post something about your buyer actually using this!  ARGGGGGG.  Well, here today, gone tomorrow, our government in action.  Best to keep the politicians out of the decision process because this is a great example.  I know that Jeff will always be on top of things with this situation.  I was just about to do a post on this too! No need now!

May 15, 2009 09:51 AM
Rainmaker
49,491
BJ Matson
Remax Town Center

Glad I saw this post, i was starting to spread the great news...  Thanks Sheldon

May 15, 2009 09:56 AM
Ambassador
657,799
Sheldon Neal
That British Agent Bergen County NJ
Bergen County, NJ - RE/MAX Real Estate Limited

Lyn - I want to be clear - I do know someone who DID use this option, and I am NOT convinced that she did anything wrong - so I DO believe there is something in the works, and I am just going on the reports fro0m Jeff that he called HUD and they have pulled the letter - that's all.

I am NOT convinced this is the end of it, and I believe there WILL be an option for something similar very soon...

Unfortunately HUD and NAR did not help by posting one thing and then so quickly seeming to change their approach.

...trust me, the dents in my wall from my head pounding it yesterday are not pleasant !!!

For now, I think it best to sit tight.... Thanks Lyn !

Sheldon

May 15, 2009 10:01 AM
Rainmaker
513,405
Pat & Wayne Harriman
Broker/Owners, Wallingford CT Real Estate
Harriman Real Estate, LLC (203) 672-4499

I find it strange that this program was retracted as fast as it was announced. I also find it interesting that there are several states that have instituted their own version of this program, but the federal version is gone like a puff of smoke. Lastly, I find it ridiculous that, as far as I know, NO ONE in a position of authority (HUD official, NAR leadership, etc) has come out and given a definitive reason as to why the program was announced and then quickly and quietly withdrawn, and whether or not it will be reinstated in some other form.

Kudos to you Sheldon, and also to Ken Cook and Jeff Belonger, for keeping this issue in front of us and for keeping us informed as to what's happening. If it wasn't for you guys we'd all be like mushrooms: kept in the dark and fed a bunch of s***.

May 15, 2009 10:15 AM
Rainer
18,600
Sarah Maus
Nextage Diversified Realty

Great info...now MY head is spinning!

May 15, 2009 11:04 AM
Rainmaker
130,156
Olga Diaz
Potter, Mng Broker, CRS, ASP, ePRO, ABR
COLDWELL BANKER TOMLINSON

Sheldon, Great Information!  Darn it anyway.....too good to be true for those buyers that had a chance to buy.  There is so much information out there.  You definitely need to keep reading to know the latest....Thanks for the post.  Hope you're well.

May 15, 2009 11:30 AM
Rainer
62,829
Teresa K. Nelson
Windermere Real Estate HLC

I cannot find this info on the HUD website. Can you provide a link for the update?

May 15, 2009 12:18 PM
Rainmaker
1,236,204
Gene Riemenschneider
Turning Houses into Homes
Home Point Real Estate

It is not like the government to allow common people to actually use money they want to give us.  Instead of pumping Billions into banks, failed businesses, and foreign pits they should be be cutting taxes like crazy and get the American people back to work.  The other problems will then take care of themselves.

May 15, 2009 12:23 PM
Rainmaker
169,414
Dana Wilkinson
Broker-Your TX agent for The Woodlands-Spring-Conroe-Montgomery
Connect Realty, The Woodlands, TX

I just received an email today from a local mortgage guy, announcing the NEWS about being able to use the $8000 for the down-payment.  He obviously hasn't been keeping up with the current events.  Guess I need to send him Jeff's blog address:-) 

May 15, 2009 12:48 PM
Anonymous #29
Anonymous
Susan

Gene:

 

I am with you!  Just think, talk the total amount of the "bailouts" divide it up amoung each TAX paying household...we would be fine..........do the math.

May 15, 2009 08:58 PM
Rainer
28,432
Gina Zimmerman
Fort Wayne Real Estate
North Eastern Group Realty

Things with mortgage funding at the city, state, fed level are changing every day.  Even my mortgage person can't give me up to date advice.  Just wondering what is going to happen when we write contracts with information we "know" to be correct and find at closing that the buyer doesn't have the right $$ for closing.  There ought to be a law!  Oops -- I think there are a few already.

May 15, 2009 08:59 PM
Rainer
24,450
Debra V. Edwards
Realtor/Builder, Cashiers, NC., Highlands, NC., Glenville
edwards builders and realty, inc.

Is the government to be trusted anyway...spend, spend, spend...my bank account was full last year at this time...now it is empty...so much for 'saving for a rainy day' theory.  That 9 mos that you're suppose to keep in emergency fund, has now been emergency funded out...don't tell this to the government, they'd probably tax me on it...  

Learn it first, right here on AR....and I was sooooo excited that 'they' were doing something right.

May 17, 2009 04:16 PM
Rainmaker
513,405
Pat & Wayne Harriman
Broker/Owners, Wallingford CT Real Estate
Harriman Real Estate, LLC (203) 672-4499
Rainmaker
389,094
Sonya Loose
Wixom Lake, Secord Lake, Sugar Springs and Smallwo
Gladwin MI Real Estate (Homewaters Real Estate)

Wow, I hadn't heard this yet and am so glad I read your blog post.  I told a client this yesterday based on an email from NAR...

May 21, 2009 10:25 AM
Rainmaker
42,689
Michael Barrow
Realtor, San Diego CA Real Estate
Keller Williams Realty - San Diego Metro

Yeah, when I first saw the initial announcement on Realtor.org I was going to blog about it...good thing I procrastinated this time! =)

May 25, 2009 10:04 AM
Rainmaker
128,109
Mike Henderson
HUD Home Hub - 303-949-5848
Your complete source for buying HUD homes

This was one of the crazier stories I have seen so far in my time in the real estate and mortgage industry.

May 26, 2009 01:43 AM
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Ambassador
657,799

Sheldon Neal

That British Agent Bergen County NJ
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