The tax credit deadline is fast approaching, only 74 days left to the end. Optimists are hoping for an extension, but aren’t we all?  It’s very uncertain whether the tax credit will be extended.  Everyday we are confronted with the reality that the government is tapped dry; though this hasn’t stopped some home buyers from accomplishing their dream of owning a home.  According to Trend MLS, the Philadelphia Housing Market for single family homes was up 1.4% in June and 4.4% in July over 2008 home sales.  That’s definitely a reason for optimism, even if the tax credit does not get extended.

Keep in mind that it’s still a buyer’s market. Interest rates are low, and FHA financing requires just 3.5% down.  If your credit score is ultra low, I can’t say you’ll be getting a loan just yet but with credit repair, by next spring you may just be calling your friends and family over to celebrate your house warming!

After a sticky situation, debating on whether a proposed $8K tax credit could be used toward the down payment of a home purchase without conflicting the requirements for first time home buyer’s already set forth by federal standard, HUD has manifested a plan.

A first time home buyer can use their tax credit toward their down payment, if a buyer is using FHA insured financing. The credit will be considered a tax advance, in which a nominal fee will be charged to the home buyer at settlement. This charge is not to exceed 2.5% of the advanced amount. For example if an advance is $6,000 the fee should only be $150.

The advance tax can not exceed closing costs; therefore a buyer can not walk away from settlement with cash in hand. Buyers also can not establish a second mortgage that would exceed the amount of their down payment, closing costs, and prepaid expenses. Basically what FHA wants first time home buyers to know is that they are not purchasing a home “Scott Free,” 3.5% of the purchase amount of their home is still required.

For additional information please visit www.irs.gov and www.hud.gov.