?> So… they say [again] the tax credit can be used towards downpayment?
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So… they say [again] the tax credit can be used towards downpayment?

[Adapted from the Mortgagee letter]

FHA plan will stimulate new home sales and help stabilize Orlando housing market

Today, while speaking to the National Association of Home Builders, U.S. Housing and Urban Development [HUD], Secretary Shaun Donovan re-announced that FHA will indeed allow homebuyers to apply the $8,000 first-time homebuyer tax credit toward the purchase costs of a FHA-insured home. Donovan said today’s action will help stabilize the nation’s housing market by stimulating home sales… we will see. I think we have a long way to go before this becomes deliverable. Our state of Florida, just passed something of similar nature, but with the credit expiring at the end of Novemeber unless it is extended, the question remains – “how many people will it really help”… you know… anecdotally. <— in honor of the Mortgage Cicerone.

The announcement details FHA’s rules allowing state Housing Finance Agencies and certain non-profits to ‘monetize’ up to the full amount of the tax credit so that borrowers can immediately apply those funds to their down payment. Home buyers using an Orlando FHA-approved lender can apply the tax credit to their down payment in excess of 3.5 percent of appraised value – or towards their closing costs, which can help achieve a low, below market, interest rate. To read the FHA’s new mortgagee letter, visit HUD’s website.

“We believe this is a real win for everyone,” said Donovan. “Today, the Obama Administration is taking another important step toward accelerating the recovery of the nation’s housing market. Families will now be able to apply their anticipated tax credit toward their home purchase right away.”

Currently, borrowers applying for an FHA-insured mortgage are required to make a minimum 3.5 % downpayment on the purchase of their home. Current law does not permit approved lenders to ‘monetize’ the tax credit to meet the required 3.5 percent minimum down payment, but, under the terms of today’s announcement, lenders can monetize the tax credit for use as additional down payment, for other closing costs, or buy down their low mortgage interest rate. In addition to the borrower’s own cash investment – which appears to still be the standard 3.5%, FHA allows Orlando First-time Home Buyer parents, employers and other governmental entities to contribute towards the downpayment over and above that 3.5%.

This is good news and can help the struggling housing sector. It should be interesting to see how they intend to implement this covertly complex initiative at the street level.

May 29, 2009 by · Leave a Comment

About Chris

Chris has been in the mortgage business for over 8 years. He found his way into the mortgage business through Jack Gritter; the originator of his family's first loan. He states "I was so impressed with the character and integrity of the gentleman that originated our loan on our first home purchase that I realized he was a man I could follow. The rest is history." Chris attended University of Central Florida and has a B.S. in Business Administration. He is a past VP of Membership for Lake Mary Toastmasters, Licensed Mortgage Loan Originator, Certified Mortgage Planning Specialist™, Justlisted.com Certified Professional Lender, Voted a Top 25 Most Connected Mortgage Professional in the Country and Voted as a Top 40 Most Influential Mortgage Professional Under 40 His additional community involvement includes: · HOA Board for The Crossings Masters Association, · HOA Board for The Reserve Association, · Graduate of Seminole County’s Community Law Enforcement Academy, · RDV Sportsplex Charter Member, · Central Florida Real Estate Investors group member, · Graduate of The Task Academy of Real Estate, Inc. Chris is owner of www.OrlandoMortgagePro.com and the www.MortgageChiliBlog.com - historically a Top 100 Real Estate Blog. Chris’s passion for his clients is revealed through his mortgage planning approach of integrating the mortgage into someone’s overall financial objectives. Chris also enjoys spending “gobs of time” with his wife of 11 years, Mary, his daughter, Brianna, and their 3 German Shepherds, Harley, Natasha, and Shelby.


No Responses to “So… they say [again] the tax credit can be used towards downpayment?”
  1. Chris,
    Which mortgagee letter are you referring to? The only letter that I see that makes any reference to the tax credit going towards downpayment is 09-15 letter and it specifically says that the tax credit is not eligible to pay for the 3.5% down.

  2. Chris Brown says:

    Ken – great point the Tax credit cannot be used for the required 3.5% down – only down payment above-and-beyond the 3.5%. Read the article above carefully.

    thanks for the comment and the clarification, however.

    Chris the implementer

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