As you may have heard, HUD re-issued the mortgagee letter that relates to first time homebuyers “monetizing” the $8,000 tax credit (ML 09-15). There were some important changes from the originally released and then retracted version. The biggest change is that the money can NOT be used for the minimum down payment on an FHA loan (3.5%). Here are some of the highlights of the new plan:


1. The Homebuyer can receive the tax credit by purchasing a home and amending their tax return for 2008. They would receive the tax credit within a month or so from the time they amend. The Homebuyer may also simply apply the tax credit to 2009’s tax returns and receive the credit next year (as long as no taxes are owed).

2. The Homebuyer may borrow money utilizing the tax credit as a plan to repay the loan through an approved institution. This would create a second lien against the property which is allowed per FHA guides.

3. The Homebuyer may “sell” their tax credit through a gov’t agency, HUD approved non-profit or a HUD approved mortgagee. Any funds that the Homebuyer gets from selling the credit can NOT be used to satisfy the 3.5% minimum down payment requirement for an FHA loan. They may use the money to increase their down payment beyond the 3.5% and for any other loan costs.


You can read the mortgagee letter here: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-15ml.doc


You can read the IRS summary here:
http://www.irs.gov/newsroom/article/0,,id=204671,00.html


You can see the form that tax payers must file here:
http://www.irs.gov/pub/irs-pdf/f5405.pdf


You can read HUD’s press release here:
http://www.hud.gov/news/release.cfm?content=pr09-072.cfm


Please let me know if you have any questions related to this or anyone we can help pre-approve for you.


Your Trusted Advisor,