It has amazed me how many people (mainly Realtors and lenders) are already out there proclaiming that you can now go back to the days of the “No money down” loans with FHA and you can do it right now. Well, that’s not quite the whole story. Let me explain:
What I know:
- I know that FHA is now allowing a borrower who qualifies for the $8000 tax credit to use that tax credit as the downpayment for purchasing the house.
- I know that they can’t get any cash back – if they need $7000, they can only get $7000.
- Government agencies and non-profits can do second liens against the house for the downpayment.
- The payments on that second lien need to be counted into qualifying rations. In other words, if you are going to borrow the $8000 so you can use it for your down payment, you need to be able to pay that amount back. Gee, there’s a novel concept.
- FHA approved mortgagees can do a “bridge loan” against the tax credit.
What I don’t know:
- I don’t know whether any FHA approved non-profits are going to be willing to do second liens in situations like that.
- I don’t know whether any FHA mortgagees (such as my bank) are going to be willing to do a bridge loan against a tax credit. Typically banks don’t like to do unsecured loans and I’m not sure how you can secure a loan against a tax credit.
- I don’t know what fees and rates will be charged for such a bridge loan.
Personal feelings:
- In today’s volatile market, if you aren’t able to come up with 3.5% for a downpayment on a house, maybe you should continue to rent for a while.
- The “tightest” 12 to 18 months that a home buyer typically has is their first 12 to 18 months when they are getting used to the house payment. Do we really want to add the cost of having to pay back a bridge loan on top of that?
So I guess my recommendation is essentially this:
- Take a deep breath.
- Wait to give the financial institutions the time to sort this all out.
- Once we Read more