$8,000 First Time Homebuyer Tax Credit - Approved by FHA/HUD 5-29-09 - But buyer BEWARE !!!

By
Real Estate Mortgage Broker with Social Media - Infinity Home Mortgage Company, Inc

Tax credit for first time homebuyers

 

 

BUYER BEWARE of Tax Credit

 

The first time homebuyers tax credit of $8,000 has been approved by HUD for all FHA loans. But don't get too excited too quickly. If you get a chance to read the mortgagee letter, ML 2009-15, it states that you can't use this tax credit for the required down payment of 3.5%.

HUD originally put out mortgagee letter 2009-15 on May 12th, but was rescinded the next day. Please read about that here : $8,000 tax credit rescinded by HUD. For some reason, it was prematurely placed on HUD's web site, but apparently wasn't finalized. Now we have a new version and if not read correctly, you could be putting misinformation out there. So what does the new mortgagee letter state?

 

 

 

Here is the positive part about the tax credit. You can receive the first time homebuyers tax credit upfront, but not through the IRS.  This would be illegal. Please read : It's illegal to receive your tax credit before you close on your homeBuyers - BEWARE, please read that, because too many people are saying that you can get the money directly from the IRS prior to closing. The IRS & HUD both say no!!!

So how can you receive this upfront?  It can be given to you as a second or a silent second from any Federal, State, or local agencies, and any FHA mortgagee or any FHA approved non-profit organization.  People, in layman's terms, this is already acceptable by HUD's standards, except for the lender that is now able to give the monies upfront in a form of a 2nd mortgage. Another terminology is that this can be an advance loan from any of the entities mentioned above.

 

 

 

Summary :  Essentially, this means that the entities mentioned above, are purchasing this tax credit on your behalf and giving it back to you. The short version of this is that you can use some of the money from the $8,000 Tax Credit as your down payment, but after you put down the first 3.5% of that down payment. Meaning, you have to come up with 3.5% of your own money still. With FHA loans, it can still be a gift from a relative/family member.  It also can come from non-profit or government agencies to be used as your initial down payment, but not used through the tax credit. Overall, the tax credit that is advanced, can be used for all closing costs. But you can't receive monies back at closing. 

And again, keeping in mind, it's illegal to receive this tax credit upfront directly from the IRS. There is more verbiage in the mortgagee letter 2009-15 , but the main point is that you have to have 3.5% of the downpayment yourself, before you can use the tax credit that would be 'loaned' to you.

 

 

THOUGHTS??? - Well, in all honesty, how does this truly help? What is the gov't thinking here? As a buyer, I would still need the initial 3.5% of my monies for the down payment. Again, needing money to buy. I know some of you are for this fact, that buyers should have skin in the game. But keep in mind, this was not the true demise to our foreclosure mess. We need to sell houses to keep this economy going.  Just my opinions and food for thought.  thanks

 

 

My Series on the First time homebuyers $8,000 tax credit - Everything you need to now, from start to finish - What's allowed and what's not allowed :

 

 

 

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

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

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For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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  1. Tom Burris 05/29/2009 11:12 AM
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Topic:
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Rainmaker
378,959
Regina P. Brown
e-Pro Realtor
California Coast & Country Homes, Inc.

Jeff, I appreciate you keeping us updated on this ever-changing issue.  I need to have the correct info as soon as it comes out, so I can be an advocate for my buyers!

June 03, 2009 01:06 AM
Ambassador
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Christopher and Stephanie Somers - Realtors - Philadelphia Real Estate
Realtor / Owner - RE/MAX Access

Jeff - Great points and clarification ! Is a little confusing but I think I got most of it !  If not, all one has to do is come back and read this post for the answers !  ~ Chris

June 07, 2009 08:43 PM
Anonymous
Mark Fullwiler

I have mixed feelings about the past confusion of the tax incentive being offered as a down payment. I was worried, should it have been possible, that folks who really were not prepared to manage a housepayment would get into trouble like the sub-primers of  a few years ago. An angle to this credit that many are not aware of is that the borrower can have a co-signer and still qualify. I presently have two deals going where this is the scenerio. Are you seeing much of this?

August 26, 2009 05:43 PM
Anonymous
kjs7654

Does anyone know who or where i can write to in regards to the 2008 "Tax Credit" or interest free loan of $7500.  I don't fell that it is fair that in 2009 people would get $8000 "Tax Credit" that they DON'T have to pay back. I feel that we should be allowed to keed the money without paying it back, or that those in 2009 should have to pay thiers back as well. Those of us who purchased a home last year helped the economy as much as those who purchased in 2009.  If anyone has info please e-mail me at KJS7654@cox.net  Thank you!!!

October 17, 2009 05:39 PM
Rainer
21,653
Kevin Cottrell
Austin Real Estate Today

99 days left for the tax credit in 2010.  Most buyers not only don't understand the program details - but are unclear on the specifics, deadlines, etc.  Great piece.  Worse, right now, inventory in our market in St Louis is low - sellers think that spring here doesn't start for another 60 days and may miss the push of buyer activity. I issued a statement discussing need for sellers to get on the market by early Feb which has fortunately been picked up by the local press.

January 20, 2010 06:46 AM
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I just want to educate people about mortgages and the process. In regards to lending, I am very creative, intuitive, honest, and one who communicates information, may it be good or bad. I am a loan officer that looks out for your best interest.