On the tax credit, down payment issues and

As the old saying goes, if it sounds too good to be true, it probably is.  I've been hearing a lot of talk around here lately about the $8000 tax credit and using it for a down payment on a home.

Earlier this month, there was a lot of horn tooting excitement because it was announced that it would be possible to use the anticipated tax credit refund as collateral for a short term loan which could then be used as a down payment for a FHA mortgage. This was thrilling news for many first time home buyers out there, and the information was coming from reputable sources - the US government, National Association of Realtors.

A day later, with much less fanfare, the news changed. It was not said that the tax credit could not used as a down payment in this fashion. Oops.  The details are still being worked out, and while the change is anticipated, nothing has be finalized to allow this change.

FHA requires that a buyer has a down payment of 3.5%. This money can be from the buyer's savings, a gift from a relative, from an approved non-profit group or government agency (down payment assistance program), from a secure loan (ie against an IRA or real property) or from employee contribution programs through the workplace. FHA does not allow for the down payment to come from unsecured loans like those that would be taken out against the anticipated tax refund. The excitement stemmed from early words that the language in the FHA approved sourced for the down payment would be changed to allow for this, but it did not happen.

The tax credit is real, and it is a huge bonus for anyone who has never owned a home or who has not owned one within the last three years and who closes on a home prior to December 1, 2009. There are rules, regulations and limitation on it though.

Please, be wary of those in our profession who are too free with financial advice.  We all have limitation on our knowledge. I do not pretend to know it all, which is why most realtors hesitate to give advice on matters like the tax credit to our buyers.  Any buyer who is anticipating receiving this credit should talk not only with a knowledgable realtor but also with a repuatable mortgage banker and/or tax accountant about this.

Brenda Carus
Re/Max Towne Square Realty
Certified EcoBroker, Re/Max Green Agent
Monroe Area Real Estate

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