HUD announced today that it has approved the monetization of the $8,000 first-time home buyers tax credit, making it available to buyers at the time of purchase.
Here’s a few highlights:
- Housing Finance Agencies such as the Washington State Housing Finance Commission and certain non-profits will be able to monetize the tax credit, offering a loan against the tax credit at the time of purchase, which buyers can apply towards the down payment.
- For buyers using other FHA-approved lenders, the monetized tax credit can only be applied in excess of FHA’s required 3.5% down payment or towards other closing costs. In other words, it cannot be applied towards the initial 3.5% down payment requirement. As a result, most people will be able to use the monetized funds for closing costs rather than towards the down payment.
- This option only applies to FHA-insured mortgages, not conventional loans. As such, it’ll benefit buyers of single family homes or townhouses more so than condos. The reason for this is that FHA-insured loans are only available to HUD-approved condos. With only about 300 approved buildings in Seattle, many condos are not eligible. Additionally, HUD limits the number of FHA-insured units in a condo complex to 10% (e.g. only 2 units in a 20 unit complex will be eligible for FHA).
While this particular monetization option isn’t likely to help Seattle condo buyers much, it’s definitely a great option for first-time buyers who are taking advantage of FHA-insured mortgage loans. At the very least, buyers can increase their down payment amount or cover closing costs. The recently passed state version would help condo buyers but that seems to be dead in the water at this point.
The $8,000 first-time home buyers tax credit will expire on November 30, 2009. So if you’re interested in taking advantage of the credit, keep in mind, there’s only about 4.5 months left to get under contract. Also, the King County courthouse will close beginning Wednesday, November 25th for the Thanksgiving holiday weekend, you’ll essentially need to close/fund/record the purchase by November 24th to qualify for the credit.
More information:
HUD/FHA: Donovan announces recovery act’s homebuyer tax credit can immediately help thousands of first-time homeubyers to buy a home
SeattlePI.com: Feds will allow tax credit for down payment, closing costs
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