Home buyers will be able to use the federal $8,000 first-time home buyer tax credit for down payments on Federal Housing AdministrationÂ loans, U.S. Housing and Urban Development Secretary Shaun Donovan announced Tuesday. Things continue to improve for first time home buyers and young families in Hawaii who are approaching the correcting real estate market with renewed enthusiasm and possibility.
“We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a down payment,” Donovan said at the National Association of Realtors’ Midyear Legislative Meetings & Trade Expo in Washington, according to a printed copy of the remarks released by HUD.
FHA will allow approved lenders and nonprofits, and state and local government agencies to issue short-term bridge loans buyers can use for down payments, Donovan said. Buyers would repay the loans after getting their tax refunds. Donovan said FHA would soon release details on the new program.
FHA loans fell out of favor during the housing boom, with the explosion of privately funded subprime mortgages. But the subprime market has all but disappeared over the past two years, and FHA’s nationwide market share surged from 1.9 percent in the fourth quarter of 2006 to 23.7 percent at the end of last year, according to HUD.
Don Riley, executive vice president of Windermere Services, said 60 to 65 percent of first-time buyers in the Seattle, WashingtonÂ area use FHA loans, which allow people to buy with as little as 3.5 percent down
Allowing use of the tax credit for down payments essentially turns the credit into a form of down payment assistance. The FHA allows government agencies and nonprofits to give buyers down payment assistance, although it recently barred such assistance from home sellers. HUD officials said mortgages with seller-funded assistance had higher default rates, largely because sellers often built the assistance into the price, meaning buyers were essentially financing the entire purchase.Â Because of the expensive nature of property in Hawaii, FHA loan limits for the state are higher than many state. FHA loan limits are listed below for each of the counties in Hawaii:
For further info about special programs from the government in Hawaii, check out the HUD in Hawaii page.
If you want to know more about programs for first time home buyers, e-mail me Ron Margolis, Hawaii Life Buyer’s Agent.