There's no end in sight for economic stimulating efforts. A recent revision to the first-time homebuyer credit makes purchasing a home this year even more appealing than it was when the original version was announced in February.
While the original credit would give eligible buyers an $8,000 credit on their next tax return, the revision permits buyers to use the $8,000 for a down payment.
To learn about the nuances of using the cash for a down payment, read more.
While the down-payment option is quite appealing for many buyers who may not otherwise be in the market, there are limitations. Find the main points about monetizing the $8,000 credit below.
- If you're eligible for the homebuyer's credit, you may use the credit amount to secure a piggyback or bridge loan from private lenders, state housing agencies, or through some nonprofit groups. That loan would then be used toward your down payment.
- The credit may only be used in connection with FHA financing. Those loans require a down payment of at least 3.5 percent, which the buyer must come up with on their own or through certain state and local housing agencies. The $8,000 credit would be applied after the 3.5 percent minimum has been met.
- No matter how you choose to use the tax credit (down payment, closing costs, etc.) you must have purchased your home before Dec. 1.
- Colorado, New Jersey, and Ohio have launched state programs that provide bridge loans to buyers wishing to take advantage of the down payment option.