Good News Regarding the $8000 Tax Credit Act!

The U.S. Department of Housing and Urban Development announced on May 29 that the Federal Housing Administration will allow state housing finance agencies to provide second mortgages “monetizing” the tax credit so that borrowers can use the funds for upfront costs for the purchase of homes with FHA-insured mortgage loans.

“This is great news for thousands of families who want to take advantage of today’s low interest rates, competitive prices, great selection and the federal tax credit that is only available until Nov. 30, but could not save enough money for a downpayment and closing costs,” said NAHB Chairman Joe Robson.

HUD announced that FHA-approved lenders can purchase the tax credit from the home buyer in advance, so that the home buyer can use the funds for closing costs or make a downpayment in addition to the 3.5% minimum. Home buyers who go directly to FHA-approved lenders still need to come up with the 3.5% minimum downpayment that is required for an FHA-insured loan.

What exactly does “monetizing” the tax credit mean?
The term “monetization” is defined as the act of converting something into money. In the context of the first-time home buyer tax credit, monetization means treating the payment of the credit as if it were cash and allowing its use as a payment for certain closing and downpayment expenses.

What is a “bridge” loan?
A bridge loan is a type of loan that is intended to be outstanding for a very short time period, often only a few days or weeks. Bridge loans are used to provide funds in situations where the borrower is expected to receive funds, such as the payment of this tax credit, within a very short time. Read more

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