No. Well, Yes. Um, Not quite yet.
I have had several Realtors and many borrowers ask the question, “Can I use the $8000 First Time Home Buyer Tax Credit as a down payment?”
First, I did have some borrowers claim their tax credit when they filed their taxes around April 15. And they received the money, even before they bought their home.
Once taxes are filed, however, then the home buyer can either ammend the filed return using form 1040X, and file the IRS Form 5404 to claim the tax credit this year; or they can wait until they file taxes for 2009. Either way, the home buyer will need a Settlement Statement to file.
Then, HUD got involved. Then they didn’t. And a lot of confusion has sprung up around that in the past few days. You see, HUD issued a Mortgagee Letter on May 11 stating that buyers can claim the Tax Credit and use it as the Down Payment on a home at the closing table.
Then on May 13, that Mortgagee Letter disappeared from the HUD website – so the tax credit cannot be used as the down payment.
What happened is that HUD jumped the gun. In principle, they said, it is okay to bring the tax credit to the closing table to serve as the down payment. In practice, however, entities and means to get the tax credit to the closing table are not available/approved.
So, my best guess is that we will see this revisited by HUD in the very near future; but for now it is not possible. The next best thing? Have the first time home buyer get a loan from family, from 401(k), etc, and bring that as the down payment. Then, file the ammendment to the 2008 tax return, and reimburse the donor for the down payment a few weeks after closing. So, if you are buying a home around Atlanta, and you have not owned a home in the past three years, then you are a first time home buyer, by definition, and sooner or later you will receive the tax credit, if all other criteria qualify.
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