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How can a person use their 1st Time Homebuyers Credit for a downpayment?

  • August 23 2009 - Murray
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Answers (3)

You can not use the tax credit towards down payment.  The tax credit can only be used towards closing costs per goverment guidelines.  In addition there are no lenders offering this bridge loan as of yet. 
  • August 26 2009
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Even though the government has made it possible to use the $8,000 for down payment I do not know of a lender in Utah who will allow you to do so.

A national trainer wrote this article to explain the reason why.
 The $8000 Tax Credit: Can A West Bloomfield MI First-Time Homebuyer Use It For A Down Payment?

  • August 26 2009
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You can't borrow against the first-time homebuyer tax credit to use for a downpayment on a house. You can, however, get a loan for up to the amount of your expected tax credit to use for the downpayment and closing costs. The problem is, no lender will lend you the funds because they can't create a lien against the house in case you default.

In some states, first-time homebuyers can get a loan against their expected tax credit from the state's housing agency, because they will create a second mortgage for the amount you borrow. The state of Utah does not have such a program available.

However, the Utah Housing Corp has a program called FirstHome Plus where you can borrow up to 6% of the amount of the 1st mortgage to use for the downpayment and closing costs. Your 2nd mortgage will be for the same term as your first mortgage, but at an interest rate that is 1% higher then the first mortgage. You can learn more about it at http://b2b.utahhousingcorp.org/cgi-bin/R?P=FIRST_HOME_PLUS
  • August 23 2009
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