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The updated 8000 Tax Credit Guidelines for California First Time Home Buyers has been released by HUD for FHA loans as of May 29, 2009.   Although the credit may not be used for the minimum down payment of 3.5%, it may be used for buying interest rate down, closing costs and/or additional down payment.

Here are the highlights of the Mortgagee Letter:

Tax Credit Advances with Second Liens:

• Tax credit advance combined with FHA-insured first mortgage may not result in cash back to borrower
• Secondary financing may be “soft” (silent) or require a monthly repayment
• If payments are required they must be included in the qualifying ratios
• If payments are “soft” they must be deferred for at least 36 months and not included in ratios

Purchase of Tax Credit by Non-profit Organizations as well as Federal, State and Local Government Agencies:

• Proceeds of tax credit May Not exceed the anticipated credit due to the homebuyer
• Copy of borrower’s tax refund and the IRS 5405 must be collected in the loan process
• Any costs associated with the purchase of the tax credit should be no more than 2.5% of the credit  (Ex: $6000 to be refunded with all fees discounted the borrower should receive $5850 for sale of the tax credit).
• No part of the minimum down payment of 3.5%  can come from the sale of the credit, the seller or any other person that financially benefits from the transaction
• The tax credit may be used as additional down payment, buying down of interest rate or other closing costs

Entities Purchasing the Tax Credit Due Diligence:

• Home buyers must provide the IRS Form 5405 “First Time Home Buyer Credit”
• Contact the borrower’s empllyer and review pay stubs
• Review the home buyer’s credit report to ensure no unpaid student loans or other obligations that could offset the credit
• Review previous tax returns to determine there are no unsettled obligations to the IRS

Video of 8000 Tax Credit for California First Time Home Buyers

This is truly a fantastic opportunity.  Who do you know that could benefit from a $8000 tax credit for buying a home?  Place your information below OR provide the name and info for someone you know that may benefit from this extraordinary program.