First-time homebuyers now have even more incentive to buy, as HUD Secretary Shaun Donovan announced Tuesday a plan that allows first-time buyers using FHA loans to apply the $8,000 federal first-time buyer tax credit to their down payment.
The plan would allow homebuyers to monetize the tax credit as they would be able to apply the funds toward making their down payment.
The exact details have yet to be publicly announced, but the new policy seems to provide benefits to the housing market.
First, the announcement solidifies HUD’s position regarding state finance agencies that are currently practicing this policy. While a few states had already initiated this practice, there are other states that had been waiting for more information and clarification before instituting such a policy.
Second, the new policy should act as a catalyst for housing sales by allowing first-time buyers with FHA loans to use the federal credit to cover part of their closing costs, rather than waiting several months for a tax return.
More information can be found on the National Council of State Housing Agencies’ website: www.ncsha.org/section.cfm/3/34/2920.