Federal cash available for home buyers

If you are a first time home buyer and you are having trouble saving the deposit, you may be eligible for some help from the Government soon.

Q: The Government has cash available for home buyers?

A: Buyers eligible for the tax credit who apply for mortgages insured by the Federal Housing Administration may soon also be eligible for bridge loans or cash advances, up to $8,000, that they can use for the down payment, closing costs or other loan expenses pending receipt of their tax credit check from the IRS. Housing and Urban Development Secretary Shaun Donovan announced the FHA change this month. The idea, he said, is to "monetize" -- turn into immediately spendable cash -- a tax credit that often is not received until months after the settlement date.

Q: How do they do this?

A: Under guidance drafted by the FHA, all lenders approved to do business with the agency will be authorized to provide bridge loans at closing -- secured solely by the tax credit the borrower anticipates receiving. State and local government agencies and nonprofit organizations approved by the FHA will be allowed to offer either bridge loans or second mortgages secured by the house. Although the $8,000 tax credit carries the name "first-time homebuyer," eligibility extends to anyone who hasn't owned a principal residence during the past three years. The credit amount from the IRS is the lesser of 10 percent of the purchase price of the dwelling, or $8,000.

Q: Is there a deadline?

A: Would-be buyers who believe they are eligible for the federal credit shouldn't sit around because deadline is November 30. Even though the loans will take some time to get to the market the odds are good that by the time they're ready to get a mortgage and go to closing, at least some local FHA-approved lenders will be actively in the market with bridge loans.

For more information see the article in the Washington Post, First-Time Home Buyers Can Turn Tax Credit Into Cash and the HUD press release, Prepared Remarks for Secretary of Housing and Urban Development Shaun Donovan at the National Association of Realtors Real Estate Summit - Advancing the U.S. Economy.

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