The Federal Housing Administration (FHA) now allows first-time homebuyers to receive advances on the $8,000 housing tax credit in the form of short-term loans from their mortgage lender. Buyers still have to come up with the minimum 3.5% downpayment on their own. However, the advance could be used to make a larger than 3.5% downpayment and produce a lower loan amount or be used towards closing costs.
This plan is hoped, like so many plans before, to alleviate the oversupply of housing which is currently plaguing the market.
first tuesday take: Don’t expect this plan to bring many buyers into the market. It does nothing to help first-time homebuyers over the biggest hurdle to homeownership: the downpayment. While it may be of help to some who already have the required 3.5% down, and who need that little bit more to push them over the closing costs and pad their equity, it’s probably a better idea to wait for the tax credit. Without the FHA or the lender imposing restrictions on the use of the money, the buyer could potentially use it to pay off bills, improve the home, replenish savings or retirement accounts, or re-pay relatives from whom part of the initial downpayment was borrowed.
Re: “Government allowing FHA borrowers to get advances on $8,000 tax credit” by the Los Angeles Times
