$8000 Tax Credit History
The current $8000 tax credit has been motivating first time home buyers to start looking for homes. However, there is one perceived problem with the program. The money is not available until after closing. This means buyers still have to come up with a minimum down payment of 3.5 %. This requirement prevents many from taking advantage of the current market.
Kentucky recently addressed this issue by creating a $4500 Down Payment Assistance program through KHC. Again, this excludes many Louisville area buyers because of income limitations.
What the industry has been clamoring for is a change to allow buyers to take a loan against the $8000 tax credit and apply it towards the down payment. (Note: It is still tax fraud to try to access the actual credit before closing). This change has been expected for a few weeks. In fact, the National Association of Realtors (NAR) broke a story about it a few weeks ago. Of course, the story turned out to be both premature and incorrect.
Today was the day though. The BIG NEWS the market has been waiting on. HUD announced portions of the $8000 tax credit could be monetized and applied towards closing costs. Hooray! Right?
The Devil is in the Details
Before you call your landlord and tell him where to stick it, let's look at the fine print.
- This is true for FHA loans - No big deal. This tends to be the best solution for first time home buyers with little to no cash anyway.
- This money CANNOT be applied towards the 3.5% down payment requirement. You still have to come up with this money.
- See # 2 -- It bears repeating.
- You access the $8000 tax credit via a loan. The LOAN will most likely have interest and fees associated. While the FHA promises to monitor these fees / rates closely, be sure to shop around if you are interested in this program.
Read the full HUD Announcement
OOPS!
So, the change doesn't really solve the problem mentioned above. Buyers still have to ante up a fairly significant stake to get into the game.
The modification does provide options though. You can use the money to buy down a rate, to negotiate a lower price from the seller (you no longer have to ask for closing costs), or to make a larger down payment. Of course, you always have the option of not taking a 2nd loan and getting the full refund after you buy your new home. Having choices is always better than not. Your lender should be able to help you how to best use this money when you purchase your Louisville home.
Summary
In the Louisville area, this will help some people, but other programs will help more. The $4500 Down Payment assistance programaddresses the primary problem. RHF offers 100% loans in most areas of Spencer County, Shelby County, and Bullitt County including Shepherdsville and Mt Washington. Of course, FHA still allows buyers to use gift money from parents, employers and other government organizations.
When you are ready to buy a home in Louisville or the surrounding areas, please call me (502) 921-3989 and I'll help you find a knowledgeable lender who can give you professional advice.
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Erik Hitzelberger is a licensed REALTOR with RE/MAX Alliance in Louisville. If you need a Louisville Real Estate agent please email me or call 502.921.3989.
I specialize in the following areas of the Metro Louisville Area: Prospect, Middletown, Jeffersontown (J-Town), Fern Creek, Okolona, Shepherdsville, Mt Washington, Hillview, Brooks and Pewee Valley. Click the following links to learn more about Louisville and Bullitt County Real Estate or to Search for Louisville Homes
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