FHA To Allow 8000 Tax Credit To Be “Bridge Loan”?

Ready.

Fire.

Aim!

This is essentially what has happened this week when HUD secretary Shaun Donovan announced in a prepared speech he was giving at the National Association of Realtors Real Estate Summit. Donovan commented that FHA may allow the 8000 tax credit to be used as a downpayment.

From Donovon’s speech:

And we are taking action to further help the housing market recover. I’m excited to announce here at NAR that FHA’s policy on the “monetization” of the first-time homebuyer tax credit will soon be published. I know that you’ve been waiting anxiously to hear FHA’s position on the matter. We, like you, believe that this new tax credit is not only a tremendous opportunity for first-time homebuyers, but also an enormous benefit for communities struggling to deal with an oversupply of housing. According to estimates by the National Association of Home Builders, this new tax credit will stimulate 160,000 home sales across the nation – 101,000 of which will be first time buyers who will receive the credit. Another 59,000 existing homeowners will be able to buy another home because a first time buyer purchased their home.

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 downpayment. 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.

What this means is…

No one seems to know for sure yet.

It may be true that sometime in the near future FHA will allow the 8000 tax credit to be used as a downpayment — but it may also end up getting squashed in some governmental shuffling before it becomes final.

Moral of the story: make you sure you follow the ready, aim, fire procedure… no one let the cat out of the bag before it happens.

And yes, of course we will be sure to keep you updated once everything becomes “official”.