| Are You Aware You Can Use The First Time Home Buyer Tax Credit For Your Down Payment?

Are You Aware You Can Use The First Time Home Buyer Tax Credit For Your Down Payment?

Have you been worrying about how to raise a down payment for a house? Does utilizing the First Time Home Buyer Tax Credit to assist with a down payment intrigue you? Recently I have been asked the same question again and again.

“Can I use the First Time Home Buyer Tax Credit as a down payment?”

Strictly speaking, the answer is no, you cannot.

When Congress drafted the legislation for the First Time Home Buyer Tax Credit, it intended to make it more possible for people to purchase a home. But they could not solve the problem of having the funds on the table at the time of the closing.

The problem, they discovered, was that as only first time home buyers with home purchase transactions closing prior to December 2009 are qualified, and as the IRS controls the tax credit, the IRS would need to be part of the closing process in order to confirm and provide funds for the transaction.

The IRS just does not possess the ability to be participating in so many real estate transactions.

Until last month the only solution was to obtain a personal loan, which proceeds would be used as the down payment. Usually, lenders would not permit such a personal loan for a down payment since it would affect the purchaser’s capacity for repayment.

Due to the First Time Home Buyer Tax Credit, some lenders forgave the routine “seasoning” requirement for the down payment. Seasoning means that the buyer can prove possession of the down payment funds for the past several months.

So, the tax credit was instrumental in people getting the funds for the down payment when obtaining conventional financing which required 10% or more as a down payment. But those who could not afford a 10% down payment, even given the tax credit, up to now were left out. The FHA pronounced that, as of May 29, they will permit lenders to offer a bridge loan to cover the down payment, which will be paid back with the First Time Home Buyer Tax Credit. With FHA financing, the down payment may be as little as 3.5% of the purchase price.

Given that you can get up to $8,000 from the First Time Home Buyer Tax Credit, you can now buy a home for up to $228,000 as long as you are able to afford the closing costs.

So, it is a wonderful time to purchase a home, until the end of November. The prices of homes have come down and interest rates are as low as they have ever been. The First Time Home Buyer Tax Credit is now more helpful than ever, as it is easier than ever to use it as a down payment and closing costs.

The National Association of Realtors has announced that sales increased from April to May by 2.4 percent. Even more sales were anticipated based upon pending sales, but recently an industry-wide trend has developed. Lately there has been a number of pending transactions which have been either delayed or canceled because of questionable appraisals. You may lower the risk of a purchase transaction disintegrating by making certain that the offer is not excessive. There is less likelihood of an appraisal problem if the value of the house is unquestionably greater than the amount of the offer. It also will protect you, as the purchaser, against future property value declines.

Whether looking for a home to purchase among San Jose Ca homes for sale, San Jose Ca foreclosures, or simply doing a little research so that you are an informed buyer, don’t overlook the provisions available through the First Time Home Buyer Tax Credit. In these trying times, these tax breaks can mean the difference of getting into a new home or not.

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