Tax Credit Being Used For Down Payment

Tax Credit Being Used For Down Payment 

Quick update on the $8,000 FHA Tax Credit Loans for down payment- the offer is off the table, for now, they took info off of the website.

Now HUD has pulled/rescinded their Mortgagee Letter 9-15 which allowed tax credit loans. They are apparently analyzing the issues with it.

“IMPORTANT REMINDER: Just because HUD or any other source puts information out there, doesn’t mean it will happen. Keep in mind that most lenders have overlays and can add to certain rules and or guidelines. 

It has now been retracted, and the letter removed from the HUD site. There have been questions about FHA/HUD putting out mortgagee letter 2009-15.  At this point it’s no longer there.  Here is why…. 

In regards to FHA loans, a borrower can only obtain monies for their actual down payment of 3.5% by the following :

• Their own funds
• Up to 100% of a gift from a relative/family member
• From the Federal, state, and local governmental agencies and nonprofit instrumentalities of government
• FHA approved non-profits 
• Monies from their employer in a form of employee contribution
• Monies from secured borrowed funds… IE. borrowing equity from your home to buy another home or borrowing against your car that is free and clear or borrowing from your 401-k, etc, etc  

Here is the major confusion that was put out:   Both HUD, NAR, and many realtors and loan officers that wrote about this.  In the body of the mortgagee letter, ML 09-15, at the bottom, it stated :

The Tax Credit: Short-Term Loan: 

Entities that can offer the tax credit advance with short-term loans:

• Federal, state, and local governmental agencies and nonprofit instrumentalities of government, FHA-approved nonprofits, and FHA-approved mortgagees may provide short-term or “bridge loans” secured only by the anticipated tax credit due the homebuyer as collateral.    
  
  The confusion: It states, as collateral and not as a secured lien against the home, but as a secured loan against the collateral, which in this case would be the $8,000 tax credit, which would be secured against.
  
  Because of this, HUD does not allow for monies to be borrowed or given to in any form that wasn’t mention above, to be used for the down payment.  The reality of it all, basically everything that was stated in the mortgagee letter, that has been revoked for now, is old school FHA. When it comes to FHA loans / FHA mortgages, you could get monies for your down payment from the items that mentioned above. One caveat to all of this is that HUD was going to allow for lenders to secure a short term loan or bridge loan against the $8,000 to be used to purchase a home. But again, that can’t be used for the actual down payment, because it goes against the basic FHA guidelines of down payment monies of 3.5%.” 

I hope this clears up any confusion for all of you.  If you find this information helpful, I always appreciate your referrals.