National Association of Realtors Applauds Use of First Time Homebuyer Tax Credit as Real Estate Down payment

Use $8,000 Tax Credit as Real Estate Down Payment. National Association of Realtors is Optimistic

By Sylvia Cochran

Today the National Association of Realtors comments on the change in the rules that allows the $8,000 tax credit to be used as a down payment for a real estate purchase.

$8,000 Tax Credit May Be Used For Real Estate Down Payment

The good news the National Association of Realtors was clamoring for, came in the form of an announcement from Shaun Donovan of the U.S. Department of Housing and Urban Development (HUD). The association's website reports that the FHA has given the green light to lenders for a change in the real estate down payment rules.

The National Association of Realtors states that the $8,000 tax credit that home buyers would normally be able to apply for during their tax preparation may now actually be applied toward the down payment of the real estate purchase. A specially designed loan vehicle "pays forward" the tax credit and thus the real estate buyer borrows the funds for the down payment.

In the past, the use of borrowed funds for a real estate transaction was considered an unacceptable practice. Today, it might be the little extra nudge otherwise qualified real estate buyers require to make their dream of homeownership a reality.

First Time Homebuyer Tax Credit as Real Estate Down Payment is Not a New Idea

The US News Home Front Blog reported that already in January of this year, the state of Missouri was allowing the first time homebuyer tax credit to be turned into a down payment on a piece of real estate. The Missouri Housing Development Commission (MHDC) discovered a way of writing a second loan of up to 6% of the home purchase price, which would then later on be paid off with the first time homebuyer tax credit that is valued at 10% of the purchase price.

Consumers who repay the down payment loan will not be charged interest but instead only a processing fee. Those who fail to repay when they receive the first time homebuyer tax credit see their down payment loan funneled into a 10 year loan that is repaid - with interest - over a decade.

Is it time for the National Association of Realtors to rejoice nationwide?

Sources

http://www.bizjournals.com/atlanta/stories/2009/05/11/daily37.html; http://www.realtor.org/press_room/news_releases/2009/05/re_summit?lid=ronav0019; http://www.usnews.com/blogs/the-home-front/2009/03/30/the-first-time-home-buyer-tax-credit-and-your-down-payment.html

More resources

http://www.bizjournals.com/atlanta/stories/2009/05/11/daily37.html