Qualified, first-time home buyers using a Federal Housing Administration (FHA)-insured mortgage now can apply the $8,000 federal tax credit toward their down payments, the U.S. Dept. of Housing and Urban Development (HUD) recently announced.
Currently, borrowers applying for a FHA-insured mortgage are required to issue minimum down payments of 3.5 percent. Buyers still must come up with the mandatory 3.5 percent down payment, but the tax credit now can be used as an additional down payment, or for other closing costs, which can help lower principal balances and monthly payments. The home buyer may access their tax credit through participating FHA approved lenders (a small fee will likely be assessed) or a participating non-profit. This may be done through either the purchasing of the home buyer’s tax credit or through a bridge loan.
While HUD allows for state Housing Finance Agencies to offer the tax credit up front to the home buyer, CalHFA like other state programs is experiencing a shortage of capital and is unlikely to offer such a program.
More info here.
