Real Estate News

At the National Association of REALTORS® Real Estate Summit on May 12, 2009, Housing and Urban Development (HUD) Secretary Shaun Donovan announced a program that allows borrowers to use the first-time homebuyer tax credit for a down payment or closing costs on an FHA-insured mortgage.

Further details of the program were announced today (May 29). Government entities and instrumentalities of government may provide a second mortgage. Currently, 10 state housing finance agencies offer a product buyers can use that will effectively monetize the tax credit for down payment purposes.

These states are Colorado, Delaware, Idaho, Kentucky, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, and Tennessee. The 3.5 percent down payment may also be a gift from a family member, employer or nonprofit, charitable organization.

Read a copy of just-released mortgagee letter >>

Guidance also released allows lenders to offer the monetized tax credit for down payments in excess of 3.5 percent, closing costs and interest rate buy downs. Mortgage industry leaders have indicated that this type of product may not be immediately available to consumers as lenders will need time to develop documentation for what will effectively be personal loans to the home buyer