This is the seventh in a 12-part series of weekly posts on the 2009 Home Owner Tax Credit. To see all the posts in this series, click here.
If you’re considering buying a home because you want to take advantage of the home buyer tax credit, but are reluctant to do so because you wonder how you will ever pay the down payment, you may be in luck.
Using Your Tax Credit as Down Payment
The Federal Housing Administration is working with Internal Revenue Service so that homebuyers can use their tax credit as part of their down payment. Since a down payment is about 3.5 percent of the purchase price and the tax credit is 10 percent of the purchase price, it is entirely possible that with the additional fees at closing, you would be able to pay for it with the tax credit.
How It’s Done
Since you only receive the tax credit after you buy the home, you won’t have the money at closing to pay for the down payment and other closing cost fees. So banks are putting a second lien on home purchases that qualify for the tax credit. That way, you can pay off the lien once you receive your tax credit.
When You Have to Pay Back the Second Lien
If you don’t pay back the second lien before the end of the home buyer tax credit program, you will have to pay additional interest. However, if you do pay for it before the program ends you are waived of any additional fees.
You can find out more and download a free guide to tax credit information by clicking the following link:
Home Owners Tax Credit Guide-HS-1
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