Is The FHA Short Term Tax Credit Bridge Loan A Reality?
According to a newspaper article in the Arizona Republic, written by Craig Anderson, the announcement by HUD Secretary Shaun Donovan last week at the NAR Real Estate Summit regarding a soon to be released program by FHA to allow approved FHA lenders to issue tax credit short term bridge loans has been rescinded. But has it?
There was a mortgagee letter issued by FHA, Mortgagee Letter 9-15, that pre-announced the home purchase tax credit short term bridge loan for first time home buyers, that can no longer be found on the FHA website. So it seems the interpretation of the withdrawal of the letter is that the program announcement by the HUD Secretary was premature to perhaps just plain ole wrong. But is this a fair conclusion of facts or just another news hype?
The issue that everyone seems to be barking about is the terminology in the mortgagee letter that suggested that the short term bridge loan is collateralized by the expected housing tax credit that the home buyer will get in their 2010 tax return. In this structure, the money coming in the bridge loan cannot be used for the down payment or closing costs, unless the home buyer had their own source of funds sufficient to cover the money they would get with the short term loan.
So what. Change the mortgagee letter to have the short term bridge loan be collateralized by the home being purchased just like how just about all of the down payment assistance programs work in the US.
What is more important than whether the program is coming or is not coming is the fact that the home buying market has never been greater and people sitting on the fence about whether they should buy or not should get off the fence.
The home purchase tax credit to which the short term bridge loan program is directed has a short term window for people to take advantage of it. According to the American Recovery and Reinvestment Act of 2009, first time home buyers have until 11/30/2009 to purchase a home to qualify for the $8,000 tax credit.
If a first time home buyer does not have enough money for their down payment but they can qualify for the $8,000 home purchase tax credit, then they should make arrangements to get a gift from a family member or relative, draw upon some of these other sources for down payment.
Time is running short.
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I feel like if they can give the money to the people after they purchase the home they should just allow them to recevie the money upfront providing they have already been qualified for a home. My husand and I have (he) excellent and I (fair) credit and based on that and our income we would qualify for a mortgage; however, because we don’t have the needed $8-$10k for closing and what have you. This is just my opinion.
Hampton,
We appreciate your thoughts and opinions. It is fair to assess that the federal tax credit program is missing the mark by not letting people such as yourself who have a need and qualify for it have access to it right now when you need it. There are some changes on the way that should allow access to this money in the form of a short term loan which you can pay back when you get your tax credit. Some states already have this short term bridge loan in place. What state do you live in? If your state has a program you may be in luck. There are many down payment assistance programs available for first time home buyers from state housing authorities. We can point you in the right direction if you want. Please let us know the state you live in. Thanks.