HUD Approves First-time Homebuyer Tax Credit Advances to Finance Costs

National Mortgage News today reports that FHA has approved the use of bridge loans up to $8,000 against the "refundable" first-time homebuyer tax credit (FTHBC) to finance downpayment and closing costs:

"The government today gave the green light to the financing of bridge loans of up to $8,000 to first time home buyers who qualify for tax credits under the Obama Administration's economic stimulus plan. However, the new mortgagee letter stipulates that only government agencies and non-profits can give advances on the tax credits, which means lenders and loan brokers are left out in the cold."

First-time homebuyers receiving an "advance" under these new guidelines will still be required to pay back the funds. And similar to an income tax refund advance, there may be fees and charges for the advance that HUD states must not exceed "a nominal amount necessary for preparing and administering the loan."

For more details, see Mortgagee Letter 9 - 15 (Word .doc format). A pdf version is available here.

The Memphis Area Home Builders Association announced separately today they had received HUD approval for a similar program through their non-profit division, MAHBA Foundation, Inc. MAHBA's initiative, touted as the "first of its kind in the country," differs in that the tax credit does not have to be paid back as long as the homebuyer remains in the property for three years.