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$8,000 down payment assistanceUPDATE: First-Time Home Buyers Get a Break on Down Payment
(5/14/09)

It seems that what the government giveth, the government can take away; and it did just that today. The highly touted tax break allowing borrowers to secure a bridge loan in order to use their $8,000 tax credit as a down payment has been rescinded. It appears that the government did a “Ready, Fire, Aim,” and shot itself in the foot. Current FHA rules do not allow the use of the tax credit as part of the down payment; and with a bit of egg on a number of bureaucratic faces, the government removed the announcement from its website. We’ll update this message if more changes occur.


(5/13/09)

In a surprise announcement on Tuesday, May 13, Shaun Donovan, Secretary of the U.S. Department of Housing and Urban Development, said that the Federal Housing Administration will allow its lenders to credit the $8,000 first-time buyer tax credit as down payment. In a speech made before several thousand Realtors gathered for The Real Estate Summit: Advancing the U.S. Economy, Secretary Donovan said, “We all want to enable the FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment.”

FHA approved lenders will be allowed to provide a short-term “bridge loan” to consumers which will directly benefit cash-strapped buyers, allowing them to have immediate access to the $8,000 rather than waiting until their taxes are filed. The move is expected to provide an additional stimulus to the struggling housing market and will ease the cash burden on first time home buyers.

Secretary Donovan also presented an optimistic projection for the housing market, stating, “I do think we have some early signs that the market overall is stabilizing. Since January we’ve seen home sales moving up and down around a relatively stable number, and we are seeing the first signs that the rapid decline in home process is starting to abate.”

 

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