What you should know about the

FHA Plan to Allow Homebuyers to Use the $8,000 Tax Credit

Homebuyers across Florida can take advantage of a Federal Housing Administration program that allows qualified first-time homebuyers to use the $8,000 tax credit upfront to help with the purchase costs of a FHA insured home.

Details of the FHA plan include:

• FHA now permits its lenders to provide a short-term bridge loan to qualified homebuyers for the purpose of accessing the federal $8,000 tax credit at the closing table. While the loan cannot be used to cover the minimum, FHA-required downpayment of 3.5 percent, it will allow homebuyers to use the federal tax credit in one of three ways:

  1. Homebuyers can use the $8,000 tax credit to make a larger downpayment above the FHA-required 3.5 percent;
  2. They can use the tax credit to cover closing costs;
  3. Or homebuyers can use the $8,000 tax credit to buy down their interest rate.

• Therefore, qualified homebuyers applying for FHA backed financing with an FHA-approved lender that offers a bridge-loan program can use that loan to bring down the immediate costs of buying a home significantly; however, they would still have to come up with the minimum 3.5 percent downpayment - which is the buyer's personal stake in their Florida dream home.

• Other resources are available for buyers who need help with the 3.5 percent downpayment, including the Florida Housing Finance Corporation, many local government agencies and nonprofit lenders.

• In addition, Florida has approved $30.1 million for its new Florida Homebuyer Opportunity Program, which will help first-time homebuyers with downpayment assistance through its own tax credit bridge loan program, once it's established. County housing administrators will operate the program under the authority of the Florida Housing Finance Corporation.  The Florida program is separate from what the U.S. Department of Housing and Urban Development offers through the FHA program.

More About the FHA Program

Did You Know?

The federal homebuyer tax credit is expected to stimulate 160,000 home sales across the U.S. - of that number, 101,000 will be first-time buyers who will receive the credit, according to estimates by the National Association of Home Builders. An additional 59,000 existing homeowners will be able to buy another home because a first-time buyer purchased their residence. Given FHA's current market share, it's estimated that thousands of families will be able to purchase a home by using the anticipated tax credit for their purchase, along with an FHA-insured mortgage.

Consider the Source.

Homebuyers should beware of mortgage scams and carefully compare benefits and costs when seeking out tax credit bridge loan programs. Programs will vary depending on the organization offering the services. Borrowers should consider which program make sense for them, as well as what company offers the most suitable and affordable option.

Keeping Track.

For every FHA borrower helped through the tax credit program, FHA will collect the name and employer identification number of the organization providing the service as well as associated fees and charges. FHA officials say they will use this information to track the business closely and will refer any questionable practices to the appropriate regulatory agencies, as necessary.

NOTE: This document is for informational purposes and should not be construed as tax or legal advice. For specific advice on their own tax situation, consumers should always consult a qualified tax professional.

Florida Association of Realtors®