This is an email I received from a mortgage representative regarding receiving a "bridge type loan" on the federal tax credit:
Hello, in response to many, many inquiries on this issue, we have confirmed that only specific entities can advance monies as a "bridge loan" against the $8000 federal first time homebuyer tax credit.
Luckily, the NJHMFA is a participant in this program, and is currently offering up to a $5000 pre-fund loan against the tax credit that can be used for down payment
Here is the wording directly from their website
Tax Credit Loan Program - The NJHMFA "Prefund" Program
Now Available Up to $5000.00 Pre-Fund Stimulus Rebate!
The First-Time Home Buyers Tax Credit Loan ("TCLP") Program provides a loan to pay downpayment and/or closing costs to Agency Home Buyer Program first-time home buyers who meet all of the requirements of the Home Buyer Program and who are eligible for the credit as permitted by the federal law establishing the credit and the guidance provided by the IRS in the General Instructions that accompany IRS Form 5405 and who apply for a TCLP loan on or after April 8, 2009 and close on the home purchase between April 8, 2009 and December 1, 2009. The TCLP loan will not exceed $5,000 ($4,000 in the case of married filing separately) and will be secured by a second mortgage. The borrower will pledge to apply the refunds received from the first-time home buyer tax credit toward the repayment of the TCLP loan.
¨ (These funds must be repaid by the borrower no later than June 30th , 2010 or upon receipt of the tax credit from the government)
In regards to FHA loans, a borrower can only obtain monies for their actual downpayment of 3.5% by the following :
Their own saved funds
up to 100% of a documented gift from a relative/family member
From the Federal, state, and local governmental agencies and nonprofit instrumentalities of government
FHA approved non-profits
Funds from their employer in a form of employee contribution
Funds from secured borrowed assets... IE. borrowing against your car that is free and clear or borrowing from your 401-k, etc, etc , and qualifying with those payments.
With regards to Conventional loans, the borrower must have a minimum of 5% of their own funds towards down payment and the NJHMFA prefund can be used for that purpose, however obtaining mortgage insurance has become very difficult for maximum finance loans (loans above 90% LTV)
Finally, the NJHMFA will allow this prefund scenario on top of the smart start grant!!!