There has been a lot of confusing news about using your $8k tax credit to buy our home. Since the announcement was made by FHA that people will be allowed to apply the money to their purchase we have been waiting for real details of the plan to come out.
The Latest News
From the Florida Association of REALTORS®:
FHA mortgages require a 3.5 percent down payment, and the $8,000 tax credit cannot be used to override that requirement. Once the 3.5 percent down payment requirement has been met, however, the tax credit can be applied to additional costs, including a higher down payment, paying points to lower the mortgage rate, and/or closing costs.
Lenders will treat the tax credit money as a second lien on the home until it’s paid back.
From Dan Coffey, Branch Manager at Bank of America in Town of Tioga:
The FHA has approved the $8,000 first-time home buyer tax credit to be used for closing costs, but not your actual down payment (for FHA loans).
The State of Florida approved $30 million to be used to fund short term loans of up to $8,000 which were based upon the borrower’s “first-time home buyer” tax credit.
The money that the State approved to “monetize” the Tax Credit at closing is to be administered by the local Housing Agency. Translation, the same people who do the SHIP funds. I have spent some time getting the details from the Alachua County SHIP department, and here’s the scoop.
The Alachua County SHIP department indicates they must create and present a plan to Alachua County as to how their $8,000 loan will work. The County has to then approve it. Their time line as of yesterday was to present a plan sometime after mid-July. They do not plan to offer lender training until mid September.
In other words they aren’t anticipating having a program available to actually provide tax credit funds at closing until some time after October 1st. I’d be surprised if any money actually was actually available until October 15th. Yes – I know – December 1st is the deadline for buyers to even get a tax credit.
National Association of Home Builders has 9 Answers for How to Pay Upfront Costs With Tax Credit:
#2 What is a “bridge” loan?
A bridge loan is a type of loan that is intended to be outstanding for a very short time period, often only a few days or weeks. Bridge loans are used to provide funds in situations where the borrower is expected to receive funds, such as the payment of this tax credit, within a very short time.
It sounds like we will have a second surge of contract this year between October and November that will have to close before December 1st! That sounds like good news for a time of year that is usually slower.