First-time home buyers to have quicker access to tax credit

President Obama's economic stimulus plan, introduced in February, included a tax credit to the extent of $8,000 for first-time home buyers. However, home buyers could receive the tax credit from the Internal Revenue Service (IRS) only after the tax season or filing an amended return (which costs money and time). In an effort to incentivize home buyers, the Department of Housing and Urban Development has unveiled a policy change which will provide the tax credit up-front. According to the new policy, borrowers who avail mortgages from Federal Housing Administration (FHA) approved lenders can get advances from lenders in order to meet costs associated with home purchase.




This will enable borrowers to receive the tax credit in advance, so they don't have to wait to get the money from the IRS. However, the advance from the lender cannot be used for the 3.5% down payment that borrowers have to make for FHA loans. A typical loan has $3,000 to $4,000 in closing costs, title insurance, and other fees. The advance can be used by borrowers for meeting such costs. Keith Gumbinger of HSH.com, a publisher of mortgage and consumer loan information, says the program "could just grease the wheels for a couple more people to get into FHA." Shaun Donovan, Secretary of Housing and Urban Development, said, "What we're doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing."

By : Vayron Mirabal
Source: Short sales Riches