First Time Homebuyers’ Tax Credit Can Now Help Cover Closing Costs
The Secretary of Housing and Urban Development has announced that HUD will allow "monetization" of the tax credit. What does that mean?
It means that HUD will allow buyers to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.
Under the guidelines announced by HUD, non-profits and FHA-approved lenders will be allowed to give home buyers short-term loans of up to $8,000. <p The guidelines also allow longer term loans secured by second liens to be used by government agencies, such as state housing finance agencies, to facilitate home sales.
Approved FHA lenders will be able to purchase a home buyer’s anticipated tax credit to pay closing costs and downpayment costs above the 3.5% downpayment that is required for FHA-insured homes.
Read the HUD mortgagee letter (pdf) and an explanation of the FHA Mortgagee Letter on Tax Credit Monetization (pdf).
