1st Time Homebuyers, Blog

First Time Homebuyer? Uncle Sam Now Wants to Make Your Down Payment For You.

Some things seem too good to be true, but you might be surprised. Recently, the planets have started to align in favor of the first time homebuyer. The combination of low prices in the San Fernando Valley, FHA-backed loans at 3.5% down, and the Federal Government’s first time homebuyers’ tax credit (up to $8,000), means that Uncle Sam is quite literally willing to pony up for you to “buy” a house if you close before December 2009. Better yet, recently announced rule changes mean that even if you don’t want to (or can’t) pay any down payment out of your own pocket, the tax credit means that the Federal Government is willing to pay for the entire down payment on a property costing up to approximately $225,000, provided you get a FHA-backed loan. (Do the math yourself.) As the Wall Street Journal’s online edition reported on May 29, 2008:

“The policy change means home buyers, who use FHA-backed financing, can get a short-term loan to help buy a home. The loan is repaid a few months later, after the buyer files an amended tax return and receives the credit.”

The government’s rather heroic attempt to pump a bit of air into the deflating housing bubble appears to be having a major influence on first time homebuyers. I’ve heard of parents buying properties for their college students to take advantage of the tax credit. Perhaps you should ask yourself: Do I want Uncle Sam to make my down payment?