$8,000 FTHB Tax Credit in Washington State...

$8,000 FTHB Tax Credit CAN Be Used For Down Payment

HUD just announced today that the $8,000 First Time Homebuyer Tax Credit can now be used for down payment. You'll probably see this all over the news this weekend - and it'll probably be announced incorrectly. So before you get your head filled with incorrect information and make decisions based on false hopes - I want to share with you a few clarifications that I'm seeing in the announcement right now.

Type of Loan: According to today's announcement, you can ONLY use this tax credit this way on an FHA loan. If you're NOT doing an FHA loan - you can't use the tax credit this way.

3.5% Required Down Payment: On FHA loans, the buyer is required to provide at least 3.5% of the purchase price as a down payment. (Watch out for the wrong info you'll be hearing about this part!) The announce states that you STILL need your own 3.5% down payment. You CANNOT use the $8,000 as part of that 3.5% down!

Seriously, that's what it says. You can use the $8,000 for a larger down payment, to pay closing costs, to buy-down your interest rate - but you CANNOT use it until you have your own 3.5% down.

Distribution Mechanism: This part isn't in the announcement, but each State gets to decide how they are going to handle the distribution of the funds at closing. What I understand (and I may be off here a bit) is that the Washington Association of Realtors in conjunction with the Washington State Housing Finance Commission is going to be in charge of handling this.

The $8,000 will be provided as a LOAN by WSHFC using a pool of money from W.A.R. at closing to qualified borrowers. You will sign a loan commitment with WSHFC, and your tax refund will go directly to them to pay off the loan. I'm sure I'll be hearing more about the "how's" and "where-for's" next week sometime.

5 Hour Homebuyer Class: Again, I may be off here, but I also heard that anyone using this credit for down payment will be REQUIRED to take the WSHFC first time homebuyer class. Call me and I'll give you details how to do this.

Other Forms of Down Payment Assistance: Many of my buyers are planning to use some of the other down payment assistance programs for their purchase. For you, the new announcement is really cool - because these other DPA's can be used for your FHA 3.5% down payment requirement - just like they could before. And now, you can add the $8,000 tax credit to that - giving you a bit more buying power.

The good news for those waiting for this to happen is, it looks like it happened finally! And as soon as all the details are ironed out and announced - I'll be happy to help you get through these transactions.