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My realtor emailed yesterday and said that the $8000 credit for buying a house can now be used as a down payment. Will this help my wife and I qualify for a FHA or USDA loan? The extra $8000 would be great but if lenders are expecting this as common practice, will they be less likely to see a large down payment as a qualifying factor? The house we want is $130,000 and we have an additional $6000 saved for this purpose. I would think a $14,000 down payment would be exceptional.. Please advise...

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I'd definitely get prequalified in this environment. A loan officer or mortgage broker would know for certain (I would hope). As far I know, you CANNOT just come to the table at closing with your $8000 future tax credit. You need to borrow it from someone or somewhere, then file an amended 2008 return if you close by June 30th and you 'll receive $8000 in the mail from the IRS a few weeks later. You then take the cash and pay off the creditor.

If you close after June 30th, you have to wait until you file your 2009 tax return to see the tax credit. That would be March-April 2010.

Let me urge you to see a broker or loan officer as soon as possible. Do not underestimate closing costs. I was in the market until yesterday when wife and I decided to wait another year. Anyway, with a solid 10-12% cash down payment, according to two GFEs we were still looking at having to come to the table with an additional $21,000 for closing costs, escrow for taxes and insurance, real estate transfer tax, title insurance, etc. Granted, the home we almost put an offer in was a bit more than the amount you are looking to spend, but this was a conventional 5.125% loan that did not require upfront mortgage insurance (the MI would be paid monthly). With your down payment, you'll likely have to go FHA, which requires 3.5% down payment PLUS 1.5% mortgage insurance PLUS all the usual closing costs I mentioned above.

Don't get me wrong- it may be doable. But definitely get financing lined up FIRST. Requirements have tightened up considerably.

Good luck!

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I don't know, I just went with an FHA loan and bought a 208k house with only $6k or so down. Had the seller kick back the closing costs which were $8k. I would assume on a $130k home the closing costs would be a little less.

Eddie

Eddie, assuming a $208k home, 3.5% down is roughly $7k. Plus you need 1.5% upfront MI, which is $3k. Plus escrow for taxes and insurance (roughly $3k-$4k). Plus you would need a minimum of 1% real estate transfer, or $2k, plus title insurance which would be $1500. Then you have all the fees, certifications, etc. that are pretty customary such as required home inspection $300-$500, funding fees (points?), flood certifications, termite inspections, title transfer fees, etc.

Your #s only total $14,000. What costs that I listed above did not exist for you? My experience (twice at closing plus recent GFEs) is that these are all unavoidable.

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  • 3 weeks later...
Eddie, assuming a $208k home, 3.5% down is roughly $7k. Plus you need 1.5% upfront MI, which is $3k. Plus escrow for taxes and insurance (roughly $3k-$4k). Plus you would need a minimum of 1% real estate transfer, or $2k, plus title insurance which would be $1500. Then you have all the fees, certifications, etc. that are pretty customary such as required home inspection $300-$500, funding fees (points?), flood certifications, termite inspections, title transfer fees, etc.

Your #s only total $14,000. What costs that I listed above did not exist for you? My experience (twice at closing plus recent GFEs) is that these are all unavoidable.

jq26, Eddie may have done several things to get in with his $6k. The 3.5% of the purchase price is the min amount required by FHA for down payment. The seller is allowed to contribute up to maximum 6% of the purchase price toward buyers' closing costs and pre-paid expenses at closing. The upfront portion of the buyer's MIP can be financed into the buyers loan amount. With this combination the buyer is getting in with just his minimum 3.5% and the inspection fees, at least in our area.

As to the $8,000 the program is available until Dec 2009.

The new portion just approved is a 'bridge loan' for the $8k that effectively allows the buyer to 'borrow' the funds early and repay with the tax credit. However, the buyer must have their own funds for the min 3.5% of the downpayment in order to qualify for the program. This is only allowed with FHA financing.

See this link for an explanation: http://blogs.wsj.com/developments/2009/05/29/how-to-get-the-8000-first-time-home-buyer-credit-upfront/

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Greetings all,

@ jg26: The IRS website says nothing about a June deadline, it still states December 1, 2009.

Where did you get the June deadline info? I must have missed it. Can you post a link?

Thanks:-)

No. The June 30th deadline was to close and then file an amended 2008 tax return to receive your $8000 immediately. After that point, you would file for your $8000 tax credit on your 2009 tax return and receive it in March/April 2010. According to my realtor, there was a rush by buyers to have closings before June 30th to achieve this immediate payment of the credit. This June deadline doesn't mean you won't get the credit. Just pertains to timing.

That may have recently changed due to this bridge loan plan Denita posted. But to receive the bridge loan for immediate use of the $8000, you'd need to have the 3.5% down from your own funds.

Personally, I'm shocked that buyers can still play these games with seller assist. The private mortgage market has effectively shut down the little/no down payment game that got us into this trouble. But somehow FHA still thinks it is wise.

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FHA has backed off the program to allow the $8000 Tax Credit to be used as a downpayment.

Also, I spoke with my lender and a lender that works with my Real Estate Agent and they both said that the Deadline to file an amended 2008 Tax Return for the Tax Credit is November, not June 30th.

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You are correct. The $7500 tax credit plan had the pre-July 1 optional acceleration clause. The $8000 tax credit extends the acceleration clause all the way out to November 30th, 2009. Shows you all the misinformation swirling out there. That statement came straight from my realtor's mouth about a month ago.

http://www.ninocefalu.com/updates.php

"The homebuyer credit was recently enhanced by the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5). The pre-ARRA rules for the homebuyer credit apply for homes bought after Apr. 8, 2008 and on or before Dec. 31, 2008. The credit for these 2008 home purchases is reflected on an individual's 2008 return. A credit for a home bought after Dec. 31, 2008 and before Dec. 1, 2009 would normally be reflected on an individual's 2009 return but, at a taxpayer's election, may be taken on his 2008 return.

Under pre-ARRA law, for qualifying purchases of principal residences in the U.S. after Apr. 8, 2008 and before July 1, 2009, eligible first-time homebuyers could claim a refundable tax credit equal to the lesser of 10% of the purchase price of a principal residence or $7,500 ($3,750 for married individuals filing separately).

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You are correct. The $7500 tax credit plan had the pre-July 1 optional acceleration clause. The $8000 tax credit extends the acceleration clause all the way out to November 30th, 2009. Shows you all the misinformation swirling out there. That statement came straight from my realtor's mouth about a month ago.

http://www.ninocefalu.com/updates.php

"The homebuyer credit was recently enhanced by the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5). The pre-ARRA rules for the homebuyer credit apply for homes bought after Apr. 8, 2008 and on or before Dec. 31, 2008. The credit for these 2008 home purchases is reflected on an individual's 2008 return. A credit for a home bought after Dec. 31, 2008 and before Dec. 1, 2009 would normally be reflected on an individual's 2009 return but, at a taxpayer's election, may be taken on his 2008 return.

Under pre-ARRA law, for qualifying purchases of principal residences in the U.S. after Apr. 8, 2008 and before July 1, 2009, eligible first-time homebuyers could claim a refundable tax credit equal to the lesser of 10% of the purchase price of a principal residence or $7,500 ($3,750 for married individuals filing separately).

Yep, lots of misinformation out there.

I have been searching for a home for about 3 months and I will be closing on a property on July 1st. So when I saw the post about the June 30th deadline, I had to find out if I needed to move my closing to the end of June.

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Infomation about the 1st Time Buyer's Tax Credit on IRS website:

www.irs.gov/newsroom/article/0,,id=204671,00.html?portlet7

1st Time Buyer's Tax Credit Tax Form:

www.irs.gov/pub/irs-pdf/f5405.pdf

First-Time Homebuyer Credit Questions and Answers: Homes Purchased in 2009:

www.irs.gov/newsroom/article/0,,id=206293,00.html

First-Time Homebuyers Have Several Options to Maximize New Tax Credit:

www.irs.gov/newsroom/article/0,,id=205416,00.html

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Eddie, assuming a $208k home, 3.5% down is roughly $7k. Plus you need 1.5% upfront MI, which is $3k. Plus escrow for taxes and insurance (roughly $3k-$4k). Plus you would need a minimum of 1% real estate transfer, or $2k, plus title insurance which would be $1500. Then you have all the fees, certifications, etc. that are pretty customary such as required home inspection $300-$500, funding fees (points?), flood certifications, termite inspections, title transfer fees, etc.

Your #s only total $14,000. What costs that I listed above did not exist for you? My experience (twice at closing plus recent GFEs) is that these are all unavoidable.

Sorry, I forgot I replied to this thread.

Firstly, I only needed 3% down, not 3.5%. I got a certified check for $6240 that I brought to the closing. MI was included in the closing costs and was about $3k. Didn't pay any points (got %5.375). I didn't really pay attention to the rest of the fees since they were covered by the seller, but I'm positive they were about $8k because we asked for 4% to cover closing costs and they accepted the offer.

Eddie

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