$8000 Tax Credit – FHA Lets You Use It Now

About everyone has been wishing you could use the “free” $8000 tax credit for 1st time home buyers at the closing and now you finally can, sort of…HUD has announced that FHA lenders can develop bridge loan products to allow buyers to use the $8000 tax credit at the closing.  From early news it’s not so straight forward as letting you use the $8000 as your complete down-payment but some aspects are pretty close.

According to Realtor.org news article, the benefits of this news include:

• Closing costs can be covered
• You can buy-down the interest rate (paying points on your mortgage)
• After providing the first 3.5% of down-payment buyers can apply the tax credit as additional down-payment.

What this means for a buyer is that you will still have to come up with 3.5% of the purchase price as a downpayment but after that you could avoid having to pay anything else at the closing.  This could help you keep thousands of dollars in your savings account.

What a buyer would be doing is taking out a short-term loan with the $8000 credit as the collateral.  When the tax credit comes in you would repay the funds you borrowed to cover your closing costs and additional down-payment.

Personally, I really like the fact that you have to come up with the 3.5% down-payment to purchase a home.   This will help to qualify buyers and also gives a ‘reality check’ on buying a home.