Yesterday was a great day! Shaun Donovan, Secretary of Housing and Urban Development, released a statement detailing that FHA will allow first time home buyers to monetize the tax credit and be able to use these funds as a down payment for a new home. This is unbelievable news and a great cause for excitement. Now, first time home buyers will not need to wait until the following year in order to receive the $8,000 tax credit. Instead, these funds can be used at the time of closing in order to cover the FHA 3.5% minimum down payment. Since this news was just announced yesterday, I am sure it will take a few weeks to a month for the specific guidelines of this new rule to fall in place. In the meantime I will continue to update this Blog with any future details as they are released.
If you would like a brief overview of the how FHA will allow buyers to monetize the tax credit, please visit the link below to watch a short video. We have not received any specifics on how the funds will be monetized, but it is my feeling the government will offer short term tax free bonds on the private market to fund these short term bridge loans. This way the government can generate investment from private capital and help boost the housing market at the same time, two birds with one stone!
Buyers Can Use the Tax Credit as Down Payment Video
Be patient with this process! We have come a long way with lending regulations and the development of lending programs to help the nation through this financial crisis, but it will take a little time for all the banks and Investors who fund FHA loans to determine exactly what information they will need to review throughout the underwriting process. Remember, FHA does not buy, service, or originate mortgage loans. They simply present the outline of acceptable lending guidelines banks and Investors can use when approving and funding an FHA mortgage.
A quick comment on the 2nd part of the video linked to this message; I feel for the broker community, I used to own my own brokerage no more than 2 years ago. Mortgage brokers are being squeezed right now and there are numerous causes for why this is happening. I chose to rejoin the banking platform as I saw many of these problems coming well before the storm hit. Waterstone Mortgage (WSBF) is on the cutting edge of how mortgages will be underwritten, approved, funded and sold in today’s volatile industry. We truly do have all the benefits of a bank and a brokerage due to our stellar reputation within the financial community. If you would like to learn more about the banker vs. broker relationship please let me know…
Stay tuned, more information is to follow and this new reform in FHA guidelines will be a great way to make the rest of the year an extreme success!
Hi Michael,
This is great news! I’d like to talk to you more about this sometime. Dave and I are thinking about buying in the next year or so, and I’m wondering if you think this tax credit will be around after the November 30 deadline that I think is set now? — kim