Orlando First-Time Home Buyers: Use the $8000 Tax Credit to Defer Closing Costs

Orlando first-time home buyers can finally  – and officially – use their $8,000 tax credit to help cover their home loan closing costs.  While we learned about the coming of this rule a week or so ago, its actual final version is a bit different from what was expected.

Yes.  First-time home buyers here in the Orlando, Florida area may use the $8,000 tax credit to help cover closing costs, but the 3.5 percent down payment requirement must still come from either the buyer’s funds or another acceptable FHA down payment source.  Put simply, the $8,000 you receive as a first-time Orlando home buyer may only be applied to the costs that lie outside of the required 3.5  percent down payment.

HUD still wants you to have some skin in the game.

How the New FHA Tax Credit for Down Payment Costs Rule Changes Things

With the issue of Mortgagee Letter 2009-15, entitled “Using First-Time Home buyer Tax Credits“, HUD has outlined exactly how the first-time home buyer tax credit can be used.

Basically, Orlando first-time home buyers can take out short-term loan against their anticipated tax credit to cover closing costs.  However, this money can only be used to cover buyer-side closing costs in excess of the required FHA 3.5 percent down payment.

Here’s the specific wording from Mortgagee Letter 2009-15:

Accordingly, the proceeds of the sale of the tax credit to FHA approved mortgagees, the seller, or any other person or entity that financially benefits from the transaction (or any third party or entity that is reimbursed, directly or indirectly, by the financing benefiting person or entity), may not be used to meet the 3.5% minimum down payment, but may be used as additional down payment, buying down of interest rate, or other closing costs.

Now, I know some of you might be thinking “Man, why can’t we use the $8,000 for both the down payment and closing costs?”

Here’s the deal.

Rare is the case  – in my experience – that you don’t run into some challenges when folks get into loans with absolutely no out of pocket money in the deal.  Meaning – you have to have at least a little bit of money on the line that you stand to lose if you default on your Orlando mortgage.

I think this new FHA tax credit loan program will be helpful in terms of taking care of whatever buyer closing costs aren’t covered by the seller – especially in bank owned or foreclosed property situations – and may even provide some money for basic move in expenses or some furniture.

I hope you found this post useful! As always, if you or anyone you know is in need of a local Florida mortgage broker, I’m your guy. Call me at 863-604-3019 or apply online for your Florida mortgage. We’ll keep you posted and let you know when it’s time to pull the trigger!

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