$8000 First-time Tax credit can be used on closing costs

Last Friday, the U.S. Housing and Urban Development announced guidance which allows home buyers to utilize the tax credit upfront. Under the guidance, FHA approved lenders can create bridge loans based on the tax credit. These loans would enable home buyers to buy down interest rates, help cover closing costs and for increasing the down payment over the minimum 3.5 percent. Buyers would still have to have the 3.5% minimum required for the down payment.


The first-time home buyer tax credit was enacted last year--and improved upon earlier this year--to help encourage households to enter the housing market while interest rates are low and affordability is high. The credit is worth up to $8,000 and is available to households that haven't owned a home in at least three years. The credit does not have to be repaid, and is fully reimbursable, so households can get their credit returned to them in the form of a payment.