Can the $8,000 tax credit now be used for the FHA down payment? City of Chico Mortgage Subsidy News.
The short answer is no! Many lenders, thus realtors, interpreted the new FHA guideline to allow borrowers to monetize their future $8,000 first time home buyer tax credit for their 3.5% minimum down payment. THIS IS NOT THE CASE! The new guideline allows them to use their $8,000 tax credit for FURTHER down payment (on top of the 3.5% down payment) or for closing costs. Thus making the new guideline worthless in my opinion. Why worthless? Most, nearly all, FHA first time buyers would rather have a seller credit covering their closing costs and actually get $8,000 in cash after closing as opposed to using it for a larger down payment or closing costs. Remember, gift funds from family can still be used for down payment funds. Many of my first time home buyers are still getting into their first home with no money out of their pockets. They are getting a gift from mom and dad for the down payment, a seller credit for closing costs, and then choosing to pay mom and dad’s gift back with their $8,000 tax credit (that they can receive shortly after closing by amending their 2008 tax returns).
Is back in action! The city will be accepting new submissions as of July 1st. The city has changed the amount of subsidy they will be providing to first time home buyers this time around. Instead of a monetary amount, the subsidy will be based upon a percentage of purchase price according to the borrowers income level. Almost everything else has stayed the same. If you or any of your clients have any questions about the subsidy please give me a call. I have been using the city subsidy with buyers since 2004. Most potential buyers meet the income guidelines to qualify for the subsidy program, BUT it is another thing meeting the city’s debt to income ratios (which are different than FHA guidelines) to use the subsidy in conjunction with an FHA mortgage.
Article Written By Ari Gagne at Access Lending in Chico
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