Home Buying in 90814>Question Details

Chris, Home Buyer in 33314

How does the 8,000 tax credit work for an FHa loan? Will it be automatically deducted from the closing costs?

Asked by Chris, 33314 Thu Jun 11, 2009

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View my blog at http://thehowtotoguide.blogspot.com/ and you will find all the information you need about the tax credit. Good luck with the home search.
1 vote Thank Flag Link Thu Jun 11, 2009
Have a mortgage broker confirm all the questions you have. All answers here regards question are GREAT however confirm that any further confusion is cleared when you are qualified for a home loan.

Keep in mind you receive annual tax benefits owning a home !

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0 votes Thank Flag Link Sat Nov 14, 2009
Here's an update on the $8,000 tax credit: It is extended through April 30, 2010, with a 60-day extension if the buyer has a binding contract by that deadline. And, existing homeowners who have lived in their principal residence for the last 5 years may claim a $6500 credit. Income limits for these credits have been increased to $125,000 for single filers and $225,000 for joint filers. up to a maximum purchase price of $800,000 for both types of tax credits. Home buyers who remain in their primary residence homes for 36 months are not required to repay the tax credit--this requirement is waived for military personnel who are required to relocate. Purchases completed in 2010 may be claimed on the 2009 tax return.

Unfortunately in California there is no current method established for lenders to allow using the tax credit as a down payment towards certain loans.
For more real estate information and property listings in Southern California, please go to http://www.juliahuntsman.com.

Julia Huntsman
Broker Associate, All California Brokerage
License No. #01188996
0 votes Thank Flag Link Sat Nov 14, 2009
The credit can be used towards down payment and/or closing costs to my knowledge. It is not credited through escrow but rather you will obtain what is known as a "bridge" loan through a lender.

As for using the credit for down payment a buyer must still use their own funds for the 3.5% down and the $8,000 may be used to increase the down payment.
0 votes Thank Flag Link Thu Jun 11, 2009
Hi Chris,

The American Recovery and Reinvestment Act of 2009 (Recovery Act) provides for as much as an $8000 tax credit to qualified first-time homebuyers. FHA now supports the use of this tax credit to help with a Buyer’s “down payment”. In reality, as I currently understand, the $8K cannot be used for a down payment; but rather, only to pay for settlement costs. HUD Mortgagee Letter 2009-15 provides the guidelines for using the $8K tax credit (see link below).

Here is the “top 10” list of things you need to know about the FHA’s view on this subject:

1. The IRS tax credit refund can be made only to the taxpayer and not a third party.
2. Government agencies may offer tax credit advances with second liens.
3. The buyer cannot get cash back through the tax credit advance.
4. The 2nd lien may not exceed the down payment, closing costs, and prepaid expenses.
5. The 2nd lien may be "soft" or require payments.
6. Payments on 2nd liens must be included in ratios unless deferred for at least 36 months.
7. Balloon payments on 2nd liens may not be before 10 years.
8. FHA approved lenders and FHA approved non-profits may purchase the tax credit.
9. Tax credit purchaser may not charge more than 2.5% of the tax credit as a fee.
10. IRS may deduct unpaid student loans, tax liens and garnishments from the tax credit.

Best, Steve
0 votes Thank Flag Link Thu Jun 11, 2009
Chris: The $8,000 works for an FHA loan as with any other loan. The only stipulation is that you must come up with the 3.5% deposit on your own.

The credit is not automatically deducted from closing costs although there is a brand new development, just last week, that allows some lenders to arrange this for you, so that you can apply the credit to your closing costs. Basically it equates to the lender "loaning" you the additional $8,000 in exchange for the right to receive your claim at tax time. The original method was that you file for the $8,000 tax credit with your 2009 tax return. I have more information on this on our website http://(www.villagrealty.com) - just click on the tab that says $8000 tax credit.

I just finished speaking with the listing agent about the property on SW 70th Terrace. Call me.

Angela
Tel: 954-816-7996
Villa G Realty, Inc.
Web Reference: http://www.villagrealty.com
0 votes Thank Flag Link Thu Jun 11, 2009
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