REALTOR® officials hailed U.S. Housing and Urban Development Secretary Shaun Donovan's recent announcement that the Federal Housing Administration (FHA) will allow home buyers to apply the Obama Administration's new $8,000 first-time homebuyer tax credit toward purchase costs of an FHA-insured home. They say this action will help stimulate home sales across the country.
The American Recovery and Reinvestment Act of 2009 offers home buyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. The announcement detailed FHA's rules allowing state Housing Finance Agencies and certain non-profits to "monetize" up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value, or towards their closing costs, which can help achieve a lower interest rate. The tax credit, however, cannot be used to meet the required 3.5 percent minimum down payment for an FHA-insured mortgage loan.
Buyers financing through state Housing Finance Agencies and certain non-profits will be able to use the tax credit for their down payments via secondary financing provided by the HFA or non-profit. In addition to the borrower's own cash investment, FHA allows parents, employers and other governmental entities to contribute towards the down payment.
The announcement permitting the first-time homebuyer's anticipated tax credit under the Recovery Act to be applied toward the family's home purchase right away will allow home buyers to shop for the best home price and services using their anticipated tax credit, officials say.
"A true housing recovery depends on buyers returning to the market and reducing inventory," said National Association of REALTORS® President Charles McMillan.
"With reduced home prices, historically low interest rates and now the availability of the tax credit at closing, we can look forward to further stabilization of the housing market," added Julia Truesdale Keady, president of the Silicon Valley Association of REALTORS®, the professional trade organization representing over 4,000 REALTORS® and affiliate members engaged in the real estate business on the Peninsula and in the South Bay.
Homebuyers should beware of mortgage scams and carefully compare benefits and costs when seeking out tax credit monetization services. Programs will vary from organization to organization and borrowers should consider whether the services make sense for them, as well as what company offers the most suitable and affordable option.
Keady stressed the importance of working with a REALTOR®. "Transactions these days can be complicated with the new rules and incentives. Today's home buyers and sellers want and deserve to know that their real estate professional is someone they can trust and who has their best interests at heart," she said.
A REALTOR® is a licensed real estate agent or broker who is a member of National Association of REALTORS®, and adheres to a strict code of ethics. The code of ethics goes beyond state licensing requirements and sets REALTORS® apart from other real estate licensees.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.