Categories
- Buying
- Benicia
- Investors
- Vallejo
- Solano
- Contra Costa
- Selling
- Market Update
- Loans / Financing
- Foreclosures / Short Sales
- Local Stuff
- Fun Stuff
- Vacaville
- Fairfield-Gr Valley
- Suisun City
- The Economy
- Viewpoint
- New Listings
- Resources
Archive
- July 2011 (1)
- June 2011 (2)
- May 2011 (2)
- April 2011 (3)
- March 2011 (6)
- February 2011 (4)
- May 2010 (5)
- April 2010 (30)
- March 2010 (7)
- February 2010 (6)
- January 2010 (11)
- December 2009 (15)
- November 2009 (10)
- October 2009 (20)
- September 2009 (13)
- August 2009 (15)
- July 2009 (10)
- June 2009 (9)
- May 2009 (18)
- April 2009 (14)
- March 2009 (14)
- February 2009 (22)
- January 2009 (21)
- December 2008 (7)
- November 2008 (1)
- October 2008 (2)
- September 2008 (8)
Some Buyers Will Soon Be Able To Use The First-Time Buyer Tax Credit To Close Escrow
May 14th, 2009 categories: Buying, Loans / Financing
One of the big bugaboos for many first-time home buyers using an FHA loan in Solano and Contra Costa counties is coming up not only with the 3.5% minimum down payment, but also the necessary closing costs.
Many are able to scrape together enough to cover the down payment, but are forced to ask the seller to provide a credit to cover the closing costs.
In a market where homes aren’t selling fast, that’s usually not a problem, since a motivated seller will often willingly pay the buyer’s closing costs in order to facilitate a sale.
But in the market that’s evolved in Vallejo, Fairfield, Suisun and most of East Contra Costa County in the $300,000-and-below price range since February, many homes are getting multiple offers, which has negated the need for many sellers to offer closing cost credits to their buyers.
So those who truly can’t buy without such a credit have become increasingly frustrated, as every offer they make seems to be rejected in favor of a competing offer that doesn’t require closing cost credits.
Well, those buyers may be in for some very good news shortly, as the secretary of Housing and Urban Development (HUD) recently announced that a new policy will soon be adopted allowing FHA borrowers who qualify for the $8,000 federal tax credit to use the credit when they buy. Presently, buyers can’t get the tax credit funds until after they close escrow and file the necessary income tax papers.
And that’s created a Catch-22 for many first-time buyers who know they’ll have an extra $8,000 shortly after they close escrow, but who nevertheless are short on funds while they’re in escrow, which is when they need the cash the most.
Once the new policy goes into effect, the tax credit can be advanced to eligible borrowers, which will give them another $8,000 to use towards their purchase.
And that should be a boon for those buyers who previously lost out on a house they wanted to buyer due to their need to ask for a closing cost credit.
HUD Secretary Shaun Donovan announced the upcoming policy on Tuesday, explaining that FHA-approved lenders will be allowed to “monentize” the tax credit by issuing a short-term bridge loan to the borrower, so that the money can used to close escrow.
That bridge loan will be paid off once the buyer files the income tax paperwork and receives the actual credit from the I.R.S.
So if you’re a first-time buyer who’s planning to use an FHA loan and are presently a little strapped for cash, this should be welcomed news.
I’ll post more information once HUD makes its official announcement and releases more details.
Related Articles
