In his work with Congress to pass the Recovery Act, U.S. Housing and Urban Development Secretary Shaun Donovan said, the President stated that “this economic downturn began with a downturn in the housing market and a recovery in our economy has to begin with the recovery in the housing market, as well.”
Bringing the Tax Credit to the Closing Table
In a move to further stimulate home sales across the country, Donovan announced that the FHA was allowing home buyers to apply the Obama Administration’s $8,000 first-time home buyer tax credit toward the purchase of an FHA-insured home.
Under new FHA rules, state housing finance agencies and other government entities can “monetize” up to the full amount of the tax credit to enable borrowers to immediately apply the funds toward their downpayments.
Home buyers who are using FHA-approved lenders can apply the tax credit to a downpayment beyond the 3.5% minimum required on an FHA-insured mortgage — or to their closing costs.
Donovan cited estimates from NAHB that the tax credit would help to stimulate 160,000 incremental home sales — 101,000 to first-time buyers who receive the credit and another 59,000 to existing home owners who will be able to buy another home after selling their current home to a first-time buyer.
“Given FHA’s current market share, we believe that tens of thousands of families will be able to purchase a home by our actions today in allowing this tax credit to be applied toward their FHA-insured mortgage,” he said.
“I believe this policy is a real win for everyone,” Donovan said. “And today, we are, by doing this, taking another important step toward accelerating the recovery of the nation’s housing market.
“Families will now be able to apply this tax credit toward their home purchase right away. And at the same time, I want to be very clear, we are putting in place the necessary safeguards to ensure that consumers will be protected in using this.”