A couple weeks ago, the NAR made an announcement that the $8000 tax credit could be used as the down payment for FHA loans. Some opined that lenders would provide a “bridge loan” for the down payment. Unfortunately, this was rescinded. Currently, the funds are only available in the form of a tax credit, which entitles first time home buyers a refund on their 2009 taxes (claimed in 2010).
There are several hypotheses as to why it was rescinded. The first is that law makers believe buyers should have some of their own money invested in the property. They believe that one of the factors that led to the sub prime meltdown was 100% financing. When a buyer has their own money invested in a property, they may be less likely to default. Currently, FHA requires a 3.5% down payment.
The second reason seems to rest on the “bridge loan.” While in theory, the loan seems safe to the lender, because the IRS is paying the tax credit. However, they questioned how they would get reimbursed after the buyer received it.
In the end, it was rescinded.
There have been rumors that third party non for profits like NACA may somehow get involved.
Nonetheless, the $8000 tax credit is still a HUGE incentive.
As we all have just experienced, the rules are changing at a torrid pace, sometimes daily. It is essential that we all stay up to date so we can provide the best customer service.
If you have any questions you can contact Marc at marcj@aandnmortgage.com.
Of course, all a bridge loan really does is get the money into the buyer’s hands sooner. In the end the buyer still gets $8000 to buy a house and may not put any of their own money at risk – except for a few months. Sounds too familiar.