Free money, housing grants, down-payment assistance... call it what you will, but the U.S. government's recent announcement of an $8,000 tax credit available to virtually any first-time home buyer (or anyone who hasn't owned a home in the past three years) has sparked more buyers to start shopping for homes. I've run across several people recently who say their reason for looking is the $8,000 credit that expires 12/1/09. The only trouble has been getting your $8,000 tax credit up-front so you can use it for your purchase. As it stands, the money is only available after you purchase your home and file your taxes (which means early 2010 for most current buyers). This is great for those who can borrow the money from savings then repay it after filing their taxes. But what about those who don't already have the cash to drop on a down-payment?

Besides my solution in the article linked above, there wasn't a great answer until Tuesday. HUD Secretary Shaun Donovan announced yesterday that home buyers will be able to use the $8,000 first-time home buyer tax credit for down payments on FHA loans via bridge loans. Basically, Donovan said that FHA is going to allow those entities like approved lenders, nonprofits, state and local government agencies to issue short-term bridge loans which buyers can use for down-payments. Buyers would repay the loans after getting their tax refunds.

More details are said to be forthcoming, and there are still snags to work out (like the fact that the IRS won't allow your refund/tax credit to be designated to be sent to anyone besides yourself). However, a lot of people (including the National Association of REALTORS) are working on the IRS/refund issue and say they should have this worked out soon. Once it is, the $8,000 tax credit will become a true form of down-payment assistance, and not just a reward post-closing. This should further stimulate home buyers.

Seller-funded down-payment assistance programs were recently disallowed by the FHA as it was found that the assistance amount was usually being rolled into the cost of the home (and thus the sales price raised). The Buyers were instantly upside-down and default rates on these homes were exceptionally high. This shouldn't be a problem with the $8,000 tax credit as it won't cost the sellers anything; the money will be coming from Uncle Sam... and, if government spending isn't reeled in, be repaid by our children and grandchildren... but that's another article entirely. So go out and buy a home! Your $8,000 awaits!

Ryan Cave, The "Caveman"
Truth, Honor & Personal Integrity
214-789-9366
www.CaveRealty.com