From today’s Union-Tribune:
12:24 p.m. May 29, 2009
WASHINGTON — Thousands of first-time homebuyers will be able to get short-term loans so they can quickly make use of a new $8,000 tax credit to pay for some of the costs of buying a home.
The Federal Housing Administration on Friday released details of a plan in which borrowers who use FHA loans can get advances from lenders that let them effectively receive the credit in advance, so they don’t have to wait to get the money from the Internal Revenue Service.
Most borrowers will still have to come up with the FHA’s required 3.5 percent down payment, unless they work through a state or local housing agency or an approved nonprofit. Ten states have such programs in place, according to the National Council of State Housing Agencies.
But there are many other potential uses, such as for closing costs and fees, or to beef up the down payment beyond the minimum level.
The FHA which insures about a quarter of new home loans, is projected to guarantee about 2.2 million loans in the next budget year.
Any buyer who has not owned a home in the past three years is considered a first-time buyer and eligible for the program. Borrowers can claim the credit by filing an amended 2008 tax return or can wait for their 2009 return.
The change “will present an enormous benefit for communities struggling to deal with an oversupply of housing,” Housing Secretary Shaun Donovan said in a statement.
The tax credit was included in the economic stimulus package signed by President Barack Obama in February. It is not available to individuals with incomes above $95,000 or couples with incomes above $170,000 and expires Nov. 30.
Real estate agents and homebuilders generally welcomed the change. Jerry Howard, chief executive of the National Association of Home Builders, called it a “great step in the right direction.” On Wall Street, shares of such builders as Toll Brothers and D.R. Horton rose on the news.
Still, some real estate agents were concerned that many buyers won’t benefit at all if they can’t use it for a down payment – a big hurdle for many first-time buyers.
“Still, some real estate agents were concerned that many buyers won’t benefit at all if they can’t use it for a down payment – a big hurdle for many first-time buyers.”
Yeah, so if you want to buy a house for $228K and you can get the $8K advanced for a down payment then you would essentially be getting a 0% down loan? Why not? We all know 0 down loans are great and people hardly ever default on those. Which brings up another question; if someone was to default do they have to give the $8K back? I never cease to be amazed by the infinite wisdom of our elected officials.
Go to any poor city and you’ll find a paycheck cash advance. It’s clear who this initiative is pandering towards.
If you think you’re short $8K from buying a house, you’re nuts. Any cash advance should be held in the bank, as part of your 6 months reserve, not to pay for your down payment. The fact that you’ll get it next January should be enough to bank on.
This is an Obamination. My tax dollars being advanced to more flakes makes me want to puke. A perfect example of redistribution of wealth.
Hat tip to Mr. T for finding the story, and this example:
Isn’t this what go us in trouble, in the first place. Here we go again. Let’s buy some houses. We don’t need any money. We can get a FHA loan with 3.5% down. Now the government will give us $8,000 in cash, up front.
Do the math.
$200,000 home
$7,000 down
$8,000 from the government
$1000 for a week end in Vegas
Let’s buy a few
Don’t forget the $10,000 the state is giving to buyers of new homes! Good thing we have so much money that we can afford all of these gifts to the sellers and homebuilders!
The *state* is giving $10k? I thought the builder was doing this?
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Don’t forget the $10,000 the state is giving to buyers of new homes! Good thing we have so much money that we can afford all of these gifts to the sellers and homebuilders!
CA renter | May 29th, 2009 at 11:50 pm
Here we go again! A new round of Ponzi schemes. Only this time, instead of selling these (mostly) Frankenstein mortgages to overseas investors, the govt. (taxpayers) will keep them.
We are essentially taking in our own laundry and calling this an economy.
How many times does it have to be said, we are screwed.
We keep digging the hole deeper, and then we (NAR, flippers, banks, Ponzi specialists, govt. idiots) call out, “have we reached bottom yet?”
Their answer, now is a good time to buy.
We all know this is fools gold.
But there could be a silver lining if the fools fall for it (and there’s a ton of them – met a couple at a party last weekend who was all wound up about the credit and planning on buying by December.) Sales should continue to drag comps down. I still think volume is the fence-sitter’s friend. We need the knife-catchers to take more hits!
It is just subprime all over again.
I’m all for knife catchers taking a few hits, but in reality it is tax payers taking the hits with these federally subsidized home loans / credits / modifications, etc. For the knife catchers to take a hit would require an actual reasonable downpayment. Talk about not learning a lesson.
I can’t wait to hear the government’s exit strategy. Oh wait, they don’t have one. They’ll borrow to prop up asset values until they can’t borrow any more (coming soon). We’ll then have ridiculously high interest rates / inflation that will do much more damage than if the government just let assets deflate to a normal level. This is insane!
In the mean time, we are signing up for new social programs, nationalizing the auto industry, and who knows what else that will be nearly impossible to stop once it is going. It’s unbelievable.
Who in their right mind would want to buy a house in California today? The value of mobility (as in get the heck off the sinking ship) should be greater than ever. Also, buying overvalued assets is not a good inflation hedge.
I hope I’m wrong, but it is looking like we’re going to be in a world of hurt over the next several years.
The *state* is giving $10k? I thought the builder was doing this?
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Yep! You know…the state that is going bankrupt and can’t finance classroom teachers, firefighters and cops. That state. Glad they found the resources to finance the homebuilders profit, though. Must focus on our priorities, right?
California allows qualified new home buyers a total tax credit amount equal to either five percent of the purchase price or $10,000, whichever is less. Taxpayers must apply the total tax credit in equal amounts over three successive taxable years (maximum of $3,333 per year) beginning with the taxable year (2009 or 2010) in which the new home is purchased.
http://www.ftb.ca.gov/individuals/New_Home_Credit.shtml
Yes, folks. That means that if you buy a new home in California, you qualify for the state’s $10,000 credit and the Fed’s $8,000 credit, for a grand total of $18,000! Yes, this is one of the things really driving sales volume right now.
Numerous people have told us that we need to buy now so we can take advantage of these “gifts.” Also, most of the recent buyers we’ve talked to have stated that these credits were one of the prime reasons they bought when they did. They never seem to understand that prices will be driven up by these amounts, and the buyers will just end up paying higher property taxes instead.
It’s really difficult trying to teach old dogs new tricks. They just keep spouting the NAR party line. They are all brainwashed.
Oh, just in case anyone thinks that the insanity will stop, I offer you this:
The rise in new home sales and increased buyer interest led to a call Wednesday by two state lawmakers the California Building Industry Association to pass legislation to extend the $10,000 tax credit for new home purchases.
Since March, when the California Homebuyer Tax Credit took effect, home builders in the state have seen traffic and sales rise considerably, said Horace Hogan, association chairman.
The State Franchise Tax Board, which processes the tax credit applications, reported that 1,710 applied for the credits in the first three weeks of the program, alone. As of May 6, the Franchise Tax Board reported that more than half of the tax credit — $54.9 million — has been applied for by 5,668 new home buyers in just two months.
At that clip, projections are the original $100 million set up as part of the state’s economic stimulus package will run out by early summer. Another $200 million would keep the momentum going, said Assemblywoman Anna Caballero, D-Montebello.
Caballero has co-authored legislation with Assemblyman Jose Solorio, D-Santa Ana, to extend and bolster the credit pool to $300 million. The legislation, Assembly Bill 765, which keeps the sunset date of March 1, 2010 intact, was expected to be introduced today.
http://www.mydesert.com/article/20090513/BUSINESS04/90513018/1006/NEWS01/Legislation+introduced+to+extend++10+000+new+home+tax+credit
Note that the California Building Industry (as well as the NAHB) are lobbying hard for this. This is NOT in the buyers’ best interests.
A homebuilder could easily offer this same thing by dropping their price by $10,000, and offering to apply it to closing costs or the down payment.
Instead, California taxpayers are paying to prop up the prices for the homebuilders.
Taxpayers are being bent over in a big way.
CA Renter, your scenario suggests Double Escrows may be the explanation for some of these strange sales. More Robert Allen victims????