On the May 29th 2009 the release by the U.S.Department of Housing and Urban Development states,

“FHA-approved mortgagees and FHA-approved nonprofit organizations as well as Federal, state, and local governmental agencies and instrumentalities thereof may purchase the tax credit anticipated by the homebuyer.”

What this means for you as a First Time Home Buyer is that you can use the tax credit toward the closing of your home.  The FHA approved mortgage will allow a First Time Home Buyer to use the $8,000 tax credit and apply it toward their down payment, closing costs, or to cutting down the percent of their monthly mortgage payments.  Caveat emptor. This amount may only be used in excess of the 3.5% down payment requirement.  This is clearly stated here again in the May 2009 release:

“Accordingly, the proceeds of the sale of the tax credit to FHA approved mortgagees, the seller, or any other person or entity that financially benefits from the transaction (or any third party or entity that is reimbursed, directly or indirectly, by the financing benefiting person or entity), may not be used to meet the 3.5% minimum downpayment, but may be used as additional downpayment, buying down of interest rate, or other closing costs.”

Also, in the May 2009 release the buyer is protected by a clause that limits the amount of fees that are required for the secondary lien when it explains:

“Any costs attendant to the purchase of the tax credit are to be nominal and discounting the anticipated credit to cover the costs and expenses of the transaction must be reasonable and disclosed to the homebuyer.  In FHA’s view, fees and costs that total more than 2.5% of the anticipated credit are considered excessive.  (Example:  $6000 to be refunded, with all fees and costs discounted, borrower should receive not less than $5850.00 for sale of tax credit.)”

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If you would like to read this document for yourself please go to this site and read document 9-15: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/index.cfm

If you would like to know the requirements of the First Time Home Credit please visit this site: http://www.irs.gov/newsroom/article/0,,id=204671,00.html?portlet7y

Any questions?  Did I leave anything out?  Please respond here and I’ll comment back!

Need to contact me check out my webpage: http://ronfredette.yourkwagent.com/