I recently wrote about HUD allowing the $8,000 tax credit to be used for a down payment. Read it here.. Will The IRS Make Your Downpayment?
I received another update from Howard Nugent of Wells Fargo. Here it is:
A little more information about this, provided by Jeff Mifsud, a FHA expert at Loan Toolbox:
All of this has to be implemented at a number of levels to make it truly functional, don’t expect any big lift in the short term.
1. The IRS tax credit refund can be made only to the taxpayer and not a third party.
2. Government agencies may offer tax credit advances with second liens.
3. The buyer cannot get cash back through the tax credit advance.
4. The 2nd lien may not exceed the down payment, closing costs, and prepaid expenses.
5. The 2nd lien may be “soft” or require payments.
6. Payments on 2nd liens must be included in ratios unless deferred for at least 36 months.
7. Balloon payments on 2nd liens may not be before 10 years.
8. FHA approved lenders and FHA approved non-profits may purchase the tax credit.
9. Tax credit purchaser may not charge more than 2.5% of the tax credit as a fee.
10. IRS may deduct from the tax credit: unpaid student loans, tax liens and garnishments.