Tuesday, 02 June 2009
First-time homebuyers may soon be able to access their $8,000 federal tax credit when closing on a home through a short-term bridge loan that will cover their down-payment on FHA-backed loans.
The Department of Housing and Urban Development’s Federal Housing Administration is paving the way for first-time buyers to tap a federal tax credit of up to $8,000 for a down-payment. The announcement, made by Shaun Donovan U.S. Housing and Urban Development Secretary before several thousand real- estate agents attending the National Association of Realtors Real Estate Summit could prove to be a game changer for the sluggish housing market.
The FHA plans to allow lenders and state and local government agencies to issue short-term bridge loans of the $8,000 tax credit for buyers to use for their down-payment. Buyers can then repay the loan after getting their tax refund. Essentially it works like a tax refund advance.
“We want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a down-payment” Donovan said.
Details of the new program should be coming soon.
There’s a small hang-up with the IRS, which has a rule about tax payers designating someone else to get their tax refunds. But there a lot of people, including the National Association of Realtors working on this issue.
It is thought by many that this plan could spark at least 300,000 additional sales. The national Association of Home Builders estimates an additional 160,000 new home sales- 101,000 of which would be first-time buyers who will receive the credit, Another 59,000 existing homeowners will be able to buy another home because a first-time buyer purchased their home.
If HUD and the IRS can remove the down-payment hurdle it could open the flood gates. We will all be watching this very closely to see what happens.
