Only FHA borrowers can use the tax credit as a downpayment.

From May 29, 2009:

HUD announced the finalized details of their plan to allow FHA borrowers to “monetize” the $8,000 first-time homebuyer’s tax credit provided under the president’s American Recovery and Reinvestment Act of 2009.

Click here for more details.

Thanks,
Tim

We appreciate your info and your interest in our reader’s questions. We have a much more updated post (one that has been updated almost daily) than this one — http://blog.hsh.com/?p=4005.

Back to the IRS, when I posted that IRS info, the time was different — HUD had made no mention of this. I would think HUD would consult with the IRS before releasing a potential illegal program. From what I understand this will only be available to FHA loans.

Check out the newer post and let me know what you think. You seem to be up to date on the pulse of this thing as well — please share any additional info you find and I’ll be sure to do the same.

Great hearing from you Matt, please visit us again soon,
Tim

Unfortunately, shortly after he made his speech, the news spread like wildfire and a lot of real estate bloggers posted the news. Many had to post retractions the next day. Even the National Association of Realtors® had mentioned it on our members site. It was a mess, one which I’ve covered in several posts myself.

Just thought I’d chime in.

Tim – You wrote this on April 29th and I am still combating this theory of using the tax credit as a down payment. The IRS clearly states it can not be used as you cited in your post (I have posted that same bit in many posts). If one of my clients came to me with this advice from a lender I would advise them not to use that lender and would walk away from the deal if necessary. I think the IRS will come down on some people at some point and I think they will drag agents and lenders into as well (and rightfully so).

“The biggest obstacle for first-time buyers is coming up with a downpayment,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “We commend Secretary Donovan for acting decisively to enable buyers to access the tax credit at the time of closing. This will help to stimulate home sales, stabilize housing and get the economy back on track.”

The measures announced by HUD would allow FHA-approved lenders; federal, state and local government agencies; and FHA-approved non-profit organizations to supply home buyers short-term or “bridge loans” up to the amount of the $8,000 first-time home buyer tax credit.

Longer term loans secured by second liens can also be used by government agencies and FHA-approved non-profit organizations to facilitate home sales. Several state housing finance agencies have introduced such programs and a number of agencies are considering that possibility

“No” seems to be the general consensus. You’re right though, $8,000 is a lot, especially since borrowers don’t have to pay it back.

Good to hear from you again,
Tim

Good to hear from you. I think your advocacy is legitimate and certainly warranted. Not only is the industry changing (and changing fast), I’d argue it’s overworked. Lenders are dealing with new program after new program. As you said, and you would probably know better, lenders are learning from the news media who is publishing and exercising their own interpretations of the new laws.

I partially think these types of questions have to be presented as the programs works out the kinks.

That’s great ending advice: industry insiders (lenders, brokers, bankers) should stick to the news sources designed specifically for them.

Great points, hope to hear from you again soon,
Tim

Our industry is changing and shifting in radical ways. This leaves the few overworked loan originators left trying to keep up. As a result much of the mortgage brokers’ continuing education is coming from the headlines of our teetering newspapers and 30 second cable soundbite coverage.

Therefore, my conclusion is that politicians sold this tax credit to the public (and the media) in a similar fashion, which is showing up in mortgage broker presentations.

This certainly doesn’t excuse the behavior or the tax fraud, but mortgage industry folks should reference and monitor industry specific news sources. And, the media needs to be better about reporting the news and not the political “spin.”