Using First Time Buyer Credit as Home Down payment

Hot off the Press is news from the Washington State Legislature provided to me by Georgette Ballard, Sr Loan Officer with PrimeLending.  This budget provision would help First Time Home Buyers with their down payment thus helping home sellers getting their house sold.  If signed by Governor Gregoire, this would be the first program of it’s kind in the country. 

When the Legislature passed the state budget, it included a budget provision authorizing the State Treasurer to invest $25 million in a short-term loan program in order to provide an advance payment of the federal first-time home buyers’ tax credit. This program was designed to allow potential home buyers to use the tax credit as down payment when closing the sale of their first home.

The budget plan creates a Tax Credit Advance Loan Program.  This program makes the $8,000 federal tax credit for first-time home buyers available at the closing of a home sale instead of only when a buyer files a tax return. The Washington State Housing Finance Commission would provide the down payment loans. The plan is that home buyers would repay the $8,000 after filing an amended tax return and receive a tax refund.

Here are the basics: 

  • The State Treasurer’s Office would make a deposit in an FDIC-insured, short-term account with a selected financial institution. The investment would earn a low interest rate to stay fully insured under federal guidelines.
  • Realtors and other stakeholders back the loans with funds to provide security against losses.
  • The financial institution provides the Washington State Housing Finance Commission a line of credit to advance up to $8,000 to qualified first-time home buyers for a down-payment.
  • Buyers repay the advance loan after filing for and receiving the tax credit. 

The goal of the program is to get the money to buyers efficiently and return the federal refund quickly so that the WSHFC ( www.wshfc.org ) can turn it around to provide more assistance. The funds could revolve as many as three times before the tax credit expires, reaching up to 9,000 first-time home buyers. These “bridge loans” would expire at the same time as the federal tax credit, on Nov. 30.

Steve Swanson teaches First Time Home Buyer Classes sponsored by the Washington State Housing Finance Commission.  Learn more or register for an upcoming class at www.helloRealEstate.net

 

 

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