1st Time Home Buyers Using Tax Credit for Downpayment

First Time Home Buyers…there have read blog articles recently stating that 1^stTime home buyers can use the $8,000 tax credit toward your FHA down payment when buying a house.

This information is incorrect, at this time.  FHA has very distinct requirements for down payments and where they can come from:

1. Your Own money
2. Employer may contribute as an employee contribution
3. FHA approved non-profits
4. up to 100% gift from relative/family member
5. Federal, State & Local Government agencies

The tax credit cannot be used as a down payment.

The tax credit can be loaned as a second lien by HUD approved lenders.

It is a loan against the tax credit. Specific approved agencies can loan money to the buyer as a second lien to the home buyer (a bridge loan).  Some approved HUD lenders may offer bridge second loans against the property for repayment when tax credit is received. This is still up in the air at this point.

For more information here is HUD’s explanation for using tax credits as a 1st Time Homebuyer.  Here is the First Time Homebuyer Credit, Form 5405 of the Internal Revenue for those First Time Homebuyers who purchased a home or condo this year.  Be sure to check with your accountant for futher information.

There may be some changes to this down the line.  If and when that happens I will let you know.

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