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$8,000 Tax Credit Okayed for Down Payment

Great news for first-time home buyers in Crofton

See IMPORTANT CHANGE at the bottom of this post.

FHA is now going to permit home buyers to use that $8,000 tax credit provided for them in the stimulus package as down payment on their home purchase.

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Until now, the $8,000 tax credit was just that – something linked to eligible buyers’ tax return, of no benefit to them at the time of purchase.  The National Association of REALTORS has lobbied extensively for the Fed to make these funds available for down payments, and the good news was announced to REALTORS Tuesday at their annual mid-year meeting in D.C. 

Secretary of HUD Sean Donovan said that FHA’s approved lenders will be permitted to “monetize” the tax credit through short-term bridge loans, thus allowing eligible home buyers to access these funds at settlement.

What does this mean to you, if you’re currently renting a home in the Greater Crofton area?

Let’s pretend you have your eye on a $250,000 townhome or condo (100 in this price range currently on the market in this area), you have good credit, and you’re feeling fairly secure in your job.  With a buyer’s market like we have today, you’re fairly confident that you can negotiate seller-paid closing costs, so the only thing between you and owning your own place is the 3.5% down payment totaling $8,750. 

Crofton townhomes and condos for 1st-time buyersNow that you can use this $8,000 gift from the federal government towards your down payment, you’ll only need to come up with $750 and enough for your up-front closing costs (appraisal fee, about $350).  You might even find a seller who will accept just $750 as earnest money deposit at the time of your contract and that would be credited at settlement. 

What a deal!  But there’s more…

You will have $8,000 equity in your home from the day you settle – money that did NOT come out of your bank account and you didn’t have to borrow.

Interest rates are still running about 5%, so your payment would be under $1,300 for Principal and Interest.  I’m betting that’s less than your current rent on a comparable condo or townhome.

If you’re renting now, please don’t let this opportunity get away from you!  The tax credit ends on December 1, 2009.

To get started, click on “Search for Homes” and enter your wish list including location, price range, home type (townhome or detached) and features.  You can also click on “More Search Options” for fireplace, basement and other details.  Then contact me online or call me (301–346–2923) to take a first-hand look at the interior of any Crofton area homes that interest you.

IMPORTANT CHANGE:  The Director of HUD announced this on Tuesday but now, on Thursday, reportedly it has been taken off the table.  Hopefully it’s just a matter of tweaking this policy or HUD regulations, specifically regarding the allowable sources for down payment on an FHA loan.  My guess is that they’re back to the drawing board, possibly drafting new legislation to temporarily modify the FHA regulations.  Stay tuned…  I think this will be back.

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