Many of you have heard that the First Time Home Buyer Tax Credit has been expanded and extended which I believe will keep the real estate industry from coming to a complete standstill after the original November 30, 2009 deadline.  The new deadline is that you must be under contract by May 1, 2010 but must close by June 30, 2010 to collect the credit.  They also raised the annual income limit from $75,000 to $125,000 for a single person and from $150,000 to $225,000 for a married couple.

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After much “to do” then “Indian giving,” the powers that be have finally decided that first time home buyers (defined as anyone who has not owned a home in the last 3 years) can now get an advance on the $8000 tax credit.  They can now use it for their down payment and closing costs through the use of a temporary or “bridge” loan.  Opponents say that this is going back to the old days of 105% financing and will get us back into the mess we are trying to stop.
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And we think they mean it this time, HUD issued Mortgagee Letter (ML) 2009-15, “Using First-Time Homebuyer Tax Credits for the Down payment” on May 11, 2009 only to pull it from their site the same day. Needless to say there was much rumor and speculation about the “whys” and “what-fors” but they have now re-issued the Mortgagee Letter and here’s the skinny…

This is not really a new concept. At least 10 states have already enacted some form of “Tax Credit Advance” legislation. They offer secondary financing and/or short-term loans to get the $8,000 tax credit provided in the American Recovery and Reinvestment Act of 2009 to the homebuyer BEFORE closing to use as down-payment and/or to cover closing costs. (more…)