Orange County first time time buyers can now use the $8,000 tax credit towards their down payment. Sounds great, but not so fast. The real estate industry had pushed for this to go through, but it’s not as good as it sounds. While the $8,000 tax credit is excellent, and buyers should act quickly to get PreApproved for an FHA loan and close escrow on their first home prior to the December 1, 2009 deadline, using the credit for down payment is not all that it seems.
Up until now, first time home buyers were only allowed to get that money after they bought a home, by applying for the credit-10% of the home’s price up to $8,000-on their tax returns. There are several other sources of funds an Orange County first time buyer can use for down payment.
Effective with MORTGAGEE LETTER 2009-15, entitled “Using First-Time Homebuyer Tax Credits”, HUD has detailed how the tax credit can be used to help a buyer complete a transaction rather than wait until after the transaction has closed. The policy change means home buyers, who use FHA-backed financing, can get a short-term loan to help buy a home. The loan is repaid a few months later, after the buyer files an amended tax return and receives the credit.
FHA requires 3.5% for down payment. The down payment can come from the buyers funds, a 401K, or even a gift. But the 3.5% down payment can not come from the tax credit. The tax credit can now be used for additional down payment beyond the FHA required 3.5%, or for closing costs. But what good is that really. The buyer will still need to come up with 3.5% down. Bottom line is this: The $8,000 tax credit is a wonderful incentive for buying a first home, especially at a time when interest rates are low and home prices are low. It’s a buyers market, and if that wasn’t enough, the government is handing out $8,000 just for taking the leap.
There has never been a better time. As of this writing there is only 6 months remaining for buyers to get the tax credit. Escrow must be closed prior to December 1, 2009. If you figure that it will take a month or so to get PreApproved and then find a home and get an accepted offer, and then potentially 45 to 60 days to close escrow, buyers should act fast. Orange County real estate hasn’t been priced this low in years.
The answer to that question is GET PREAPPROVED for an FHA loan today. Talk to an FHA Expert who can guide you through the initial loan process. Find someone who can answer all your questions without putting unnecessary pressure on you. Find out how much of a loan you will qualify for, how your credit is (what is your FICO score), how much of a payment are you even comfortable with and how much of a loan does that translate to.
Authored by Tim Storm, an Orange County, CA Loan Officer – Please contact my office at Trust One Mortgage for more information about an Orange County, CA home loan. 877-786-4243 x 7.
Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.
877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com
*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate (“DRE”), License # 01087829
*This is not an offer to lend. 
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