Tax Credit Ineligible for Down Payment

Bruno Capogreco a lender with Bank of America home loans here in Central Ohio just sent us an interesting article about the $8000 tax credit and the ever changing financing rules:

From the Arizona Republic
May 19, 2009
by J. Craig Anderson

Feds reverse rules to assist first-time home buyers

Federal officials on Monday reversed an earlier decision to allow first-time home buyers to use an $8,000 tax credit to borrow the down payment on a home.

A week earlier, U.S. Department of Housing and Urban Development Secretary Shaun Donovan had told the National Association of Home Builders that HUD would let banks and local governments offer short-term "bridge loans" to cover the down payment for first-time buyers eligible for the tax credit. The loans would have been available to applicants for federally insured mortgages such as Federal Housing Administration loans.

Lenders, home builders and real- estate agents had reacted favorably to the bridge-loan proposal, saying it would open up the housing market to more first-time buyers

However, not everyone was in favor of using the tax credit as collateral on a down-payment loan.

"That tax credit should be savings, not debt," said Patricia Garcia-Duarte, executive director of Neighborhood Housing Services in Phoenix.

Garcia-Duarte said the proposal too closely resembled a now-illegal practice known as seller-funded down-payment assistance, which allowed a home's seller to "gift" the down payment to a specific buyer through a non-profit organization.

Phoenix loan originator Dean Wegner was among the housing-industry professionals who had expressed enthusiasm about the bridge-loan plan.

Wegner said the program would have boosted local home sales, but he added that the bridge loans likely would have come with a high interest rate.

The loans also could have created income-tax issues, according to the IRS officials who shot down HUD's plan.

Still, Wegner remains optimistic that the government will seek other means to circumvent the FHA's required 3.5 percent down payment.

"They will probably come out with a zero-down FHA loan starting January 1, once the $8,000 goes away," he said.

Reach the reporter at 602-444-8681 or craig.anderson@arizonarepublic.com.

Here is the link to the full article
http://www.azcentral.com/arizonarepublic/business/articles/2009/05/18/20090518biz-downpayment0519.html

If you have any financing questions, please contact
Bruno Capogreco
Home Loan Consultant
Bank of America, Home Loans
614-781-3434 x221
Bruno_Capogreco@bankofamerica.com

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