Great news re: $8,000 tax credit and FHA loans

The Department of Housing and Urban Development announced plans that allow qualified first-time home buyers using a Federal Housing Administration-insured mortgage to "monetize" an $8,000 tax credit, meaning they can apply the funds to their down payment.
The recently unveiled credit, part of the Obama administration's effort to ease the housing crisis, was to be claimed on tax returns. "Families will now be able to apply their anticipated tax credit toward their home purchase right away," HUD Secretary Shaun Donovan said Friday.

Monetizing the credit effectively means FHA buyers are getting a short-term advance from lenders of up to $8,000 at closing. The money is paid back when the buyer files an amended tax return, receiving the credit.

First-time buyers using FHA-insured mortgages will have to make at least a 3.5 percent down payment on a home purchase. Friday's announcement means FHA-approved lenders may consider the funds as an additional down payment or for other closing costs, which can help lower a borrower's interest rate.

SOURCE: CHICAGO TRIBUNE