Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, announced today at an address to several thousand REALTORS that the Federal Housing Administration is going to allow first time home buyers to use their $8000 federal tax credit as a down payment for the purchase of their home (Woo hoo).
Secretary Donovan said that important changes, which the National Association of Realtors(R) has been calling for, will help consumers purchase a home. "We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a downpayment," Donovan said. According to Donovan, the FHA's approved lenders will be permitted to "monetize" the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.
What constitutes a "first time home buyer" for FHA's purposes?
A first-time homebuyer is an individual who meets any one of the following criteria:
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An individual who has had no ownership in a principal residence during the 3-year period ending on the date of purchase of the property. This includes a spouse (if either meets the above test, they are considered first-time homebuyers. |
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A single parent who has only owned with a former spouse while married. |
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An individual who is a displaced homemaker and has only owned with a spouse. |
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An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations. |
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An individual who has only owned a property that was not in compliance with State, local or model building codes and which cannot be brought into compliance for less than the cost of constructing a permanent structure. |
If you meet one of these guidelines and thought you were out of the housing market because you lack a down payment, the Department of Housings new policy may get you in the game. Call me for a referral to a lender who is experienced with FHA financing.
There is also a $10,000 tax credit available for NEW HOME purchases in California. You do not have to meet first time home buyer criteria for this tax credit, but you do have to purchase a new home, which is a home that has never been lived in. Consult your tax professional for more information.
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