First Time Home Buyers modification

Recent development in the $8,000 First Time Home Buyer Tax Credit


Another recent development: Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said that the Federal Housing Administration is going to permit its lenders to allow homeowners to use the $8,000 tax credit as a downpayment, released in an article on Realtor.org.

The Secretary of Housing and Urban Development has announced that HUD will allow “monetization” of the tax credit. What does that mean?

It means that HUD will allow buyers to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.
Under the guidelines announced by HUD, non-profits and FHA-approved lenders will be allowed to give home buyers short-term loans of up to $8,000.
The guidelines also allow longer term loans secured by second liens to be used by government agencies, such as state housing finance agencies, to facilitate home sales.
Housing finance agencies and other government entities may issue tax credit loans, the funds of which home buyers may use to satisfy the FHA 3.5% downpayment requirement.
In addition, approved FHA lenders will also be able to purchase a home buyer’s anticipated tax credit to pay closing costs and downpayment costs above the 3.5% downpayment that is required for FHA-insured homes.
**This will be a huge step towards stabilizing the ever shifting economy. By allowing purchasers to receive the credit immediately it will keep more funds available to the entire market for things like furnishings, repairs, renovations, etc. This should give a much needed shot in the arm to the ailing building and renovation sectors.

In addition, some of the most common questions I get about the tax credit (answers from Tax Credit Website above):

If my wife/husband has not purchased a home before can we qualify for the tax credit? – Unfortunately not, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit.
Do I have to be a first-time buyer to get the credit? Yes, however the law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. Therefore if you have been renting for that period of time you may qualify.
What does it mean the credit is “refundable”? – The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit (Ex: if a buyer owes the IRS $1,000 on April 15th after all calculations & deductions. The taxpayer would receive a check for $7,000 = $8,000 minus the $1,000 owed).

Nick Woodard
Hodges and Fooshee Realty
615.566.9839
www.nickwoodard.com