Friday, May 22, 2009

$8,000 Cash Available to First-Time Buyers

Ken Harney of the Washington Post reports:

The $8,000 federal tax credit for first-time home purchasers is about to morph into a ready-cash down payment source, thanks to a new federal policy change.

Buyers eligible for the credit who apply for mortgages insured by the Federal Housing Administration may soon also be eligible for bridge loans or cash advances--up to $8,000--that they can use for the down payment, closing costs or other loan expenses pending receipt of their tax credit check from the IRS.

Under guidance drafted by the FHA, all lenders approved to do business with the agency will be authorized to provide bridge loans at closing--secured solely by the tax credit the borrower anticipates receiving from the IRS. State and local government agencies and nonprofit organizations approved by FHA will be allowed to offer either bridge loans or second mortgages secured by the house.

Though the $8,000 tax credit carries the name "first-time homebuyer," eligibility extends to anyone who hasn't owned a principal residence during the past three years. The credit amount from the IRS is the lesser of 10 percent of the purchase price of the dwelling or $8,000.

The federal $8,000 credit covers purchases closed by Nov. 30. Unless Congress extends the credit, it will disappear Dec. 1.

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