Using Tax Credit to Help Pay For Closing Costs (FHA Loan)

[mnewell]

Hello!

(Originally posted on RedFin forum)

I'm currently in the process of buying my first home and would like to use the $8k tax credit to help pay for my closing costs. I have heard conflicting arguments on whether or not I can do this (my mortgage company has not been able to answer my questions) so I was hoping someone here would be able to shed some light on this.

Here are my facts:

-My home loan is a FHA (FHA loan plus a 203k streamline to pay for rehab repairs)
-I am coming up with the 3.5% downpayment myself ($8k tax credit not used for that)

It is my recollection that there was talk originally to be able to use the tax credit for down payment assistance but it is my understanding that was shot down by the IRS. I have heard that it is possible to use the tax credit for down payment or closing costs as long as it does not go towards the 3.5% down payment and the home loan is through FHA. Luckily this is exactly what I am doing.

Can anyone confirm this? If this is correct, how do I go about in using the funds at time of closing?

Thank you for your help!

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[mnewell]

[Everett_Tom]

I think this PI article covers your questions:

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I don't understand why closing costs aren't simply factored into your loan amount.

I'm doing FHA as well, and closing costs will simply be part of the mortgage - or the seller/bank will pay them. I come up with the down payment... that's it. Yes, I will be borrowing money to pay closing, if that's necessary, but at these rates, why not? I'd rather use actual cash to pay down higher interest debt (that I have, yes. If you don't, you're lucky, but if you have enough pocket money to pay for medical bills, you might consider spending some of it on insurance).

Maybe -I'm- confused, but if I have to come up with down + closing, I can barely afford to buy a manufactured house in Gold Bar. In the price range I'm in, closing costs are about the same as the down payment.

If your agent or mortgage broker can't explain this more clearly than I can, you definitely need to find a new agent and broker. Or read the above cited article, although really that's THEIR job.

I honestly intend - in this market - to put as little down into any transaction as possible. I also am trying to spend as little as possible, and pick up a repossessed casualty of the bubble. Wish me luck

Unless you HAVE to buy now, I don't know why you would be. I'm just sick of renting. Well, there's a lot more to it than that, but this isn't the bottom - that's a cruel joke.

[mnewell]

Thanks for the info.

After talking to my lender a bit more they indicated that it is up to the discretion of the lender whether or not they want to participate in this bridge-loan program. My lender has indicated that they do not participate.

sigh...

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[BillE]

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[mnewell]

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