Real Estate Buzz: $8000 Tax Credit Possible for Down Payments
By: Diane Tuman, Zillow Content Manager | May 14, 2009
At Tuesday’s National Association of Realtors Real Estate Summit held in Washington, D.C., Housing and Urban Development Secretary Shaun Donovan tipped his hand at some changes to the original $8,000 tax credit proposal for first-time home buyers that the Obama Administration announced in February.
Here’s the buzz: The feds may allow the $8000 tax credit to be used now — perhaps as a down payment on a house — rather than waiting months for a refund on a tax return. This is considered a huge plus since most first-time home buyers have difficulty coming up with a down payment and this could help motivate buyers.
Here’s a key excerpt from Donovan on the $8000 tax proposal:
We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a down payment. So FHA will permit trusted FHA-approved lenders and HUD-approved nonprofits, as well as state and local governmental entities to “monetize” the tax credit through short-term bridge loans. We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit. FHA will be publishing the details shortly.
Loan officer Justin McHood wrote about the possible tax credit changes on Mortgages Unzipped, warning that this is not in place yet, but details will emerge soon and the Seattle PI’s Aubrey Cohen reported that buyers would repay the loan after getting their tax refunds. Builder Online quotes Rob Dietz, director of tax issues at the National Association of Home Builders (NAHB) is less optimistic, saying:
“There’s no doubt that the purpose of the tax credit is to stimulate housing demand. We estimate new and existing home sales will increase by 160,000. But it’s not a tax credit that is in anyway large enough to reinflate the market—it’s just a useful and limited tool to smooth out the market,” he said. “As for causing sales to return to 2005 levels or push prices up, this tax credit is not capable of doing that.”
Many more details to be worked out. Stay tuned.
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- Categories: 8000 tax credit, Mortgages
Comments
8 Comments so far
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Marc Faulkner on May 14, 2009 5:40 pm
They need to hurry up and decide how they are going to handle this already. This will be big news if first time home buyers are able to use the credit as down payment monies vs. getting a tax credit at the end of the year. We need to be doing everything we can to stimulate the economy and the credit won’t help nearly as much unless it is allowed to be used as down payment funds.
Turkish Property Market on May 14, 2009 8:46 pm
$8,000 is a big amount of credit. I agree with Marc, they should act fast until its too late for them. I hope everyone will cope up here.
Weekly Real Estate Buzz in West Redmond, Near Microsoft, Through May 14th, 2009 « West Redmond Real Estate Buzz on May 15, 2009 11:03 am
[...] This week’s good news is the $8000 tax credit to first time buyers can, in fact, be used for t… This will continue to help boost real estate sales as more buyers are able to enter the market. [...]
Power Investor on May 16, 2009 6:04 am
The Government is certainly injecting a tremendous flow of money into the economy, including the housing market. And this is a great opportunity for first time home owners to purchase a home now. There won’t be a better time in the foreseeable future.
Sean on May 18, 2009 8:11 am
Government handouts are not good for us in the long run. Where do you draw the line. Perhaps we need a assistance for purchasing a car, paying medical bills, etc. I think it goes without saying that not everyone should own a home. This is what got us into this mess in the first place. Government handouts must stop. The government has no money, it is your money they have. Our even better, it is Japan’s, UAE’s and China’s money. Who is buying all our debt.
Steve S on May 18, 2009 11:35 am
I wonder if this will be allowed for brokers and banks or just banks? Any news on that yet?
Loan Modification on July 9, 2009 2:39 am
genius! i think almost everyone is on board with the idea of giving additional incentives to first time homeowners.
Amanda on September 10, 2009 2:31 am
This is great news, perhaps if this actually does work some other countries, like my own, will consider this as an option. Tax breaks are always welcome and I know I am stating the obvious but wow $8,000 is a lot!
Amanda