Advance on Homebuyer's Credit

HUD has announced that it will allow qualified homebuyers purchasing a new home through the FHA program to use the potential of their First Time Homebuyer's credit to help with their down payment or closing costs. FHA approved lenders will be allowed to advance the credit for those purposes. HUD is not waiving the traditional down payment requirements. The home owner will still have to have to be able to provide, from their own funds, at least 3.5% of the appraised value. The new program will allow homebuyers take actions that will allow them to save money on interest over the life of the loan. HUD is hoping that these changes will help taxpayers to buy a home now and help grow the housing market and the economy. More info can be found in the HUD press release.

Nothing in the Mortgagee letter (linked from press release) states if the taxpayer has to file for the credit by amending their 2008 tax return or if they can wait until filing 2009. While the taxpayer has to sign a doc that their credit will not be subject to offset and submit a copy of their completed 5405, the lender bears the burden of due diligence. That alone might make a lender think twice about program participation.

Comments

[Robert D Flach]

TM-

If all a potential homebuyer has to put down on a house is 3.5% - or the $8,000 gift from "Sam" - he/she should not be buying a house!

Isn't this how the whole mecking fuss started in the first place?

TWTP

[Trish McIntire]

TWTP
I didn't use FHA to buy my house but as I understand it, 3.5% is their regular minimum down payment. Which the buyer still has to come up with before the credit.
Trish