First-Time Home Buyers Can Turn Tax Credit Into Cash

Readers: Here is yet another article detailing HUD's decision to let first-time home buyers to use the $8000 tax credit for down payment. It is coming soon!

Story courtesy of:
Nation's Building News Online for May 25, 2009

First-time buyers eligible for the $8,000 federal tax credit who apply for mortgages insured by the Federal Housing Administration may soon also be eligible for bridge loans or cash advances that they can use for the downpayment, closing costs or other loan expenses pending receipt of their tax credit check from the IRS.
The FHA change was announced this month by Housing and Urban Development Secretary Shaun Donovan. As many as half of all would-be first-time buyers do not have enough cash on hand for a downpayment and closing costs, according to building and real estate industry estimates. By advancing these buyers as much as $8,000 at closing, many more would be able to afford the purchase.
Officials at NAHB say the bridge loan feature could double the total number of home purchases stimulated by the 2009 tax credit program to more than 300,000, depending on how many private lenders and state housing agencies participate.
The new bridge loans and cash-advance features of the federal credit may not be available immediately through private lenders, mortgage industry leaders say. Among the key questions to be answered: Where will non-depository mortgage companies get the $8,000 in advance money to provide upfront to buyers? Although most major banks offer second-mortgage programs, the FHA guidelines stipulate that the tax credit advances cannot be secured by a lien on the property, but only by the tax credit to be received by the purchaser.

In the meantime, would-be buyers who believe they’re eligible for the credit should shift into high gear shopping for a house — the Cinderella closing date of Nov. 30 is looming — even if they will need a bridge loan or a cash advance to complete the deal. The odds are good that by the time they’re ready to get a mortgage and go to closing, at least some local FHA-approved lenders will be actively in the market with bridge loans.

(www.washingtonpost.com) Washington Post (5/23/09); Kenneth R. Harney