First-time home buyers can now use the $8,000 federal tax credit as down payment on Federal Housing Administration-insured loans. Modification to the tax credit was announced Tuesday by the U.S. Department of Housing and Urban Development (HUD) and is hoped to significantly increase the number of first-time buyers entering the market in this year.
Under the tax credit revisions, eligible home buyers can get short-term bridge loans through FHA-approved lenders that the borrowers pay back after receiving their tax refunds. The new setup is expected to make purchasing a home more feasible because buyers can use the tax credit money upfront. It will help buyers who can afford a mortgage but are lacking sufficient liquid assets for the down payment. The arrangement basically allows buyers to access cash they have coming to them in order to get their foot in the door on purchasing a home.
Nonprofit, state and local government agencies are also allowed to supply borrowers with bridge loans tied to the new tax credit provisions. All previous qualifications to receive the credit still apply and more details on the down payment program are expected to be released in the coming days.
The update was big news at the National Association of Realtor’s expo in Washington, D.C. this week. In the wake of the HUD’s announcement, the organization is pushing for the tax credit to be extended to all home buyers (it’s currently available only to first-time buyers and those who have not owned a primary residence in three years).