First-time Charlotte home buyers can now use the federal tax credit of up to $8000 to help cover a down payment and other upfront closing costs if they are taking out a loan backed by the Federal Housing Administration or FHA. The tax credit was made available as part of the Obama administration's efforts to motivate first-time buyers and jump-start the housing market.
Instead of requiring first-time buyers to wait for weeks, possibly months, after filing their tax returns to receive the money, FHA is allowing private lenders, state housing agencies and some nonprofit groups to offer loans secured by the tax credit. This new twist should help real estate markets all around the country clear their supplies of homes for sale, including foreclosures and bank-owned properties.
The tax credit is available only for purchases made this year before December 1. Eligibility is limited to people who have not owned a home in the previous 3-years. Those buyers may be able to collect up to $8000, depending on their incomes.
Under HUD's plan, buyers cannot use the tax credit advance to pay the 3.5% down payment FHA mortgages require if they get the advance from a private lender. They can use it to add to that down payment or help defray closing costs. But buyers who turn to housing agencies can put the tax credit advance toward the 3.5% down payment as well as other purchasing costs.
Although buyers can only qualify for a tax credit once they close on a house, they can determine in advance how large a credit they will receive by providing tax documents to their lenders or local housing agencies.