Tax Credit for First-time Homeowners
The housing market has begun to show signs of new life in recent weeks, led largely by first-time buyers. Builders across the country have been reporting that historically low mortgage rates, affordable home prices and the $8,000 tax credit are reviving interest in home buying.
In the latest development, home builders received encouraging news on May 12 when HUD Secretary Shaun Donovan announced that FHA-approved lenders; federal, state and local government agencies; and FHA-approved non-profit organizations would be allowed to supply first-time home buyers with short-term or "bridge loans" up to the amount of the tax credit.
Secretary Donovan's decision to allow consumers to use the $8,000 first-time home buyer tax credit to help cover their downpayment and closing costs on FHA-insured mortgages will be a big boost to the housing market, according to the National Association of Home Builders (NAHB).
"The biggest obstacle for first-time buyers is coming up with a downpayment," said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. "We commend Secretary Donovan for acting decisively to enable buyers to access the tax credit at the time of closing. This will help to stimulate home sales, stabilize housing and get the economy back on track."
Longer term loans secured by second liens can also be used by government agencies and FHA-approved non-profit organizations to facilitate home sales. Several state housing finance agencies have introduced such programs and a number of agencies are considering that possibility.
More information about these programs can be found on the National Council of State Housing Agencies website.
Previously, the home buyer would not have been unable to access the tax credit until they filed their next annual tax return or an amended 2008 tax return and received the refund from the IRS.
Robson and other NAHB leaders discussed this matter and other housing-related issues with Secretary Donovan last week.
"Secretary Donovan shares our view on the need for a housing and economic recovery," said Robson. "We appreciate his leadership in moving swiftly to help first-time home buyers to access the tax credit up-front at the time of closing. The timing could not have been better as we are in the midst of the crucial spring home buying season."
The next step is to see how FHA-approved lenders use HUD's new guidelines to actually monetize the tax credit for first-time home buyers and structure the payback provisions of the loans. NAHB encourages lenders to act promptly to put these provisions into place.
To qualify for the tax credit, first-time home buyers must actually close on their home purchase by Dec. 1, 2009. Buyers can take the credit on their 2008 or 2009 income tax return.
For further information about the tax credit — including a detailed question and answer section and a number of home-buying resources for consumers — log on to NAHB's consumer Web site at www.federalhousingtaxcredit.com. A Spanish version is also available to provide detailed information on the tax credit to Spanish-speaking first-time home buyers.
If you are ready to build but have a few lingering questions about taxes credits, lending programs, rates or rebates; remember, "Just Ask a Builder."
Please use our contact form to send your questions, or write to "Ask a Builder" at P.O. box 294, Catlett, VA 20119.
Barkman is president of the Fauquier Chapter of The Northern Virginia Building Industry Association.
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