FHA Says First time Buyers To Have Quicker Access to $8,000 Tax Credit

With the Sacramento region’s already low-low median-home price; which is slightly more than the national figure, many people who never thought they would own a  home are now in the position to buy. However, there are still many people who can afford the monthly payment but are having a challenge putting together enough cash for closing costs and down payment. In an effort to Jump-start first time home buyers, last week, the Department of Housing and Urban Development unveiled a policy change which will provide the tax credit up-front. Recently, first time buyers accounted for half of all purchases during the first quarter nationwide.

Even with the low 3.5% down payment offered by FHA added to traditional closing costs, it could easily take $12,000 to $15,000 to get into a $200,000 home.  And now there will be a way for first time home buyers to come up with $8000 of that, to be used for everything but the down payment.

President Obama’s economic stimulus plan, which was introduced in February, included a tax credit to the extent of $8,000 for first-time home buyers. However, home buyers would receive the credit from the Internal Revenue Service (IRS). Typically you get a tax credit “back” when you file your tax return. So the credit either reduces the amount of tax you owe, or if you owe no additional tax then you are sent a refund check for the amount of the credit, after you file your 2009 tax return in early 2010.

The HUD policy change will enable borrowers to receive a loan they can repay with their tax credit. The advance from the lender cannot be used for the 3.5% down payment that borrowers have to make for FHA loans. Most typical loans have $3,000 to $5,000 in closing costs, title insurance, and other fees. The advance can be used by borrowers for meeting such costs. Keith Gumbinger of HSH.com, a publisher of mortgage and consumer loan information, says the program “could just grease the wheels for a couple more people to get into FHA.”

The federal government defines anyone who hasn’t owned a principal residence for three years as a first timer.

  1. Micha

    I guess people who own homes that have FHA mortgages are much luckier then. Good for them, I hope the tax credit really helps them buy a proper home.

  2. Micha

    I guess people who own homes that have FHA mortgages are much luckier then. Good for them, I hope the tax credit really helps them buy a proper home.

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