First-time buyer tax credit can now be used as a down payment
Filed under: Real Estate
The National Association of Realtors reports that "Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, (on May 12) said that the Federal Housing Administration is going to permit its lenders to allow home buyers to use the $8,000 tax credit as a down payment."Here's what this means: With an FHA loan, a first-time home buyer can purchase a property with as little as 3.5% down -- but really considerably less because closing costs can be rolled into the purchase price or gifted to the buyer by the seller. Using the $8,000 tax credit for a down payment would allow a first-time buyer with reasonably decent credit (FHA loans have much lower credit score requirements than conventional mortgages) and proof of income to purchase a $228,000 home with no out of pocket expenditure.
Is that really a good idea? I don't think so. Remember that writing mortgages where the buyer had no skin in the game at the time of the sale is maybe not the main factor in the overheating of the real estate market, but it's certainly in the top five (low interest rates, shoddy underwriting standards, mortgage fraud, dishonest mortgage brokers and no skin in the game were, in no particular order, probably the top five problems).
For prospective first-time home buyers though, this is good news. FHA lenders will be able to monetize the tax credit through short-term bridge loans. That is, they'll lend you the money for the down payment and then you pay it back when you receive the tax credit.
Whether it will help plant the seeds for another wave of foreclosures remains to be seen.
Reader Comments (Page 1 of 1)
5-21-2009 @ 12:20AM
jt said...
This is a great thing, and not new, FHA has been a consumer friendly loan that has helped many. In the past 5 years very few mortgage companies offered this because the mortg. company does not make a lot of money on this type of loan. FHA doesn't allow the buyer to pay certain fees mortgage companies like to charge, plus the mortgage company has to be bonded. The reason it is a GREAT loan, is that they do have income ratios of 28% gross monthly income can go for PITI and 36% for PITI plus debt, if the credit score is very good that can be a little higher. Also the borrower has to have had a good job history et. as a REALTOR, I have always loved FHA and VA loans, like you said, you can have a credit score as low as 620 and as long as it is 640 or higher you don't pay a higher rate, and right now, with conventional loans if your score isn't over 740 you will pay a much higher rate, and possibly a few points. In our area FHA loans up to 440,000 which is decent, av. home price is right under 300,000. So- no skin, you have a point, but the people that got into trouble,mostly were NINA loans - no income, no asset, no credit verification, this requires credit and income verification, and, it is subject to the property appraising, so I think it is consumer friendly, and more risk averse than you think.
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7-21-2009 @ 7:23PM
Mike Hand said...
This is a bunch of crap! Try getting a loan for a first-time homebuyer. We've had a house SOLD to the folks that have been renting it. They are first time homebuyers, they have pretty good credit, they pay their rent sometimes TWICE a month to ensure that it is paid on time, the man has been on his job CONTINUOUSLY for 17 years AND STILL CANNOT GET FINANCED!!!!!!!!!
7-21-2009 @ 7:22PM
Mike Hand said...
PROVE IT!!!!
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8-11-2009 @ 9:36AM
M. Harris said...
Anyone know where to go to finance a manufactured home?
This property began as a manufactured home, but has been modified over the years. The title has been surrendered and real estate taxes are paid. There was no problem getting financing in the past, but now we are having problems because of all the new rules. Buyer has good credit.
Looking forward to any info we can get. Thaks!
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