How To Make the Most Out of the $8000 Tax Credit

Three weeks ago, HUD Secretary Shaun Donovan announced a program that would allow borrowers to use the first-time homebuyer tax credit for a down payment or closing costs on an FHA insured mortgage at the NAR Mid-Year Conference. Forty-eight hours later that program was pulled due to insufficient details as to how to implement the program.

Last Friday, Secretary Donovan once again issued Mortgagee Letter 2009-15 detailing the guidelines of that program. Under the guidelines, FHA-approved lenders can develop bridge loans that home buyers can use to help cover their closing costs, buy down their interest rate, or put down more than the minimum 3.5 percent. However, according to senior HUD officials, loans cannot be used to cover the minimum 3.5 percent requirement. Thus, buyers applying for FHA-backed financing with an FHA-approved lender that offers a bridge-loan program can get a bridge-loan to significantly bring down the upfront costs of buying a home, but would still have to come up with the minimum 3.5 percent down-payment.

Secretary Donovan said “We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit.”

If you are a first-time home buyer and qualify for the tax credit this new program may be an option for you. Please keep in mind that you will need to have funds available for the 3.5 percent down-payment and you must close on the home by December 1, 2009. For more information about the tax credit visit my article titled First Time Home-Buyer Tax Credit FAQ's.

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