Not so soon

Amen Brother!

I entirely agree with your last two statements above! No one should ever use that money as a down payment, and yes, that IS a good sign!

Janine J. Wilson

that's crap - don't publish it un til it's a sure thing --- now i have to go back to 5 1st time buyers and tell them.....

Nothing is a sure thing with the Federal Government. They can and will change whatever is found to be legally or politically necessary. Until we can get something else in print, we won't know why it was recinded. Some have speculated that because it is a loan, the FHA Guidelines on the Purchaser having 3.5% of their own funds in the transaction were being violated.

it is their reserves.. like now its such a big thing to qualify up front as it should be instead of being entitled.

mtginsight,
That's Amen, SISTER.

Tammi, you reading skills are as well refined as your language skills. My Wednesday post made it very clear this was not a done deal.
I wrote: "This is not really news, yet. Details haven’t been worked out yet. That’s why I say soon. I will get details to you when they are ready. We’ll see how the bureaucracy plays out on this one..."

Incredible. The HUD Secretary makes a speech and releases ML 2009-15 and immediatley realizes it's a big mistake. What kind of clown has Obama appointed to run HUD? Donovan needs to resign immediately. What a fool.

Though I agree that a consumer relaying on the 8K tax credit for the entire upfront cost of purchasing a home is irresponsible, I don't think the idea should be scrapped all together. My wife and I have been saving to purchase a home for a couple years, have enough for the down payment, have a stable income source, little debit and a long track record of saving. Allowing us to use the 8K for some (or all) of our down payment will mean we have a larger reserve in case of a rainy day, and a lower monthly payment (as the 8K could be added to our existing funds for a down payment, instead of altogether replacing it).

I think the real issue is with general responsible lending. I am only planning on purchasing a home that is less than 2.5x my yearly income, yet I was easily approved for 6x!

Why not allow it to be used as PART of the upfront cost, but not to exceed a certain percentage? There are ways to mitigate the risk, while still offering an upfront benefit to purchase a home this year.

Allowing us to use the 8K for some (or all) of our down payment will mean we have a larger reserve in case of a rainy day,

The failure to fund a down payment out of savings is one of the best predictors of mortgage delinquency available. This is neither a subjective opinion nor open to debate. It's a well-known correlation validated by all available data.

Am I missing the logic here? How is it even posiable to use a tax credit that you might recieve for buying a house as a down payment when technically you would have already had to have paid the down payment and bought the hose to qualify for the tax credit. This credit could only ever be used by people that could aford a house without it unless someone is giving them a loan to payed wiht the tax credit is recieved. Maybe I just do not really understand tax, but it seems to be that tax credits only help people that have money.

..."What kind of clown has Obama appointed to run HUD?"

Haven't you noticed every appointee of Obama's is a clown... It'd be a joke if it wasn't such a travesty

"The failure to fund a down payment out of savings is one of the best predictors of mortgage delinquency available. This is neither a subjective opinion nor open to debate. It's a well-known correlation validated by all available data."

Hit the nail on the head!! This is why down payment assistance scams were outlawed. If the buyer can't scrape up 3.5% for a downpayment then they are probably not responsible enough to have a mortgage! What is even more amazing is that the $8,000 is available immediately after you close. Just amend the 2008 (the one due 4-15-2009) tax return and get a check from the Treasury!

While there are legitimate arguments for risk-based qualifying, FHA was NOT set up for that purpose.

Tarkin 17,
It wasn't possible to get the tax credit until after you bought a property. That's how the credit was designed. But NAR and other housing groups wanted to make it easier to buy without a large down payment. It didn't work out that way.

As others here have said, there is risk for both the lenders and the buyers to allowing mortgages with so little equity.

If you can't even afford a down payment .How in the world can you even be a home owner .?

HUD/FHA was designed in 1934 to provide an alternative to large down payments. Tobby number 17 had to take a shot at down payment assistance when it has provided millions of families the oportunity to enjoy home ownership and coupled with a fully documented FHA mortgage. Is it just me or did the mortgage house of cards fall at the same time DPA was Congressionally taken out of the hands of Realtors, lenders, builders and qualified home buyers. Down payment was a scape goat and not the cause of their own demise. The Real Estsate industry could use a shot in the arm buy reinstating down payment assistance.

The hypocrisy in many statements I have read not only on this blog but others is so pathetic. First off lets start with the Real Estate business as a whole. If the industry and selfish money hungry housing investors did not over inflate the housing market to begin with we would not be in this mess. I dont care what anyone says there is no house on this planet worth more than 150,000 dollars IMHO. Secondly, you blame the people who cant scrap up 3.5% down as if this is all their fault the housing market has crashed but I dont hear any of you hypocrits criticizing the people who put 20% down, lost their jobs and froeclosed or claimed bankrputcy as a cause to this problem. Are tose people with the highest unpaid mortgages not to blame also? Come on people get off your soap boxes, there is plenty of blame to go around.

5/19/09 - Update from our RE/MAX legal counsel: "Just wanted to send a quick e-mail to everyone because there have been rumors that HUD changed its mind and rescinded the decision to allow the $8K tax credit to be used as a downpayment by first time homebuyers. I received an e-mail from Brian Sullivan, spokesman for HUD, about 60 seconds ago. He confirmed that the technical details of the program are being finalized and HUD will be publishing a mortgagee letter shortly. Any newspaper article, blog, e-mail or rumor to the contrary is incorrect."