FYI: details released on plan for 1st time home buyers to receive loan based on tax credit

The Federal Housing Administration and HUD released on Friday, May 29th, details of their plan to let qualifying buyers  get an advance on the current tax credit set up for 1st time home buyers.

The plan guidelines outline some requirements to help reduce abuse of the new program by borrowers and lenders. The advance is only available to borrowers who qualify for FHA loans. Borrowers cannot use the tax credit advance for the 3.5% downpayment required to secure an FHA loan. The lender is required to contact the borrower’s employer to confirm there are no garnishments on the borrower’s wages and tax returns must be reviewed to ensure no IRS obligations are currently owed by the borrower.

The fees and costs that approved lenders can charge for advancing the tax credit should be within reasonable limits. Fees and costs in excess of 2.5% of the credit amount would be considered unreasonable by the FHA.

Among the new guidelines unveiled on the 29th is the requirement that the tax credit check be sent only to the taxpayer, not to any third parties. This requirement may derail Washington State’s measure to offer loans based on the 1st time buyer tax credit. Approval of the Washington State measure currently relies on lenders being able to receive the borrower’s tax credit payment directly from the IRS.

Do you have questions about the 1st time home buyer credit and these latest guidelines unveiled by the FHA and HUD? Would you like to know more about what programs are available to King County first time home buyers? Diane Rae Jones and Donna Cowles will be hosting another Home Buyer Seminar on Monday, June 15th, 6pm to 7pm. The seminar will be held at the Windermere Mercer Island office, located at 2737 77th Ave SE Mercer Island, WA 98040. Please call 206.406.5232 for more information.

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