If you are a first-time home buyer planning to take advantage of the $8,000 tax credit, you are in luck. You can monetize the tax credit to assist you in the purchase of your home. Just remember, the deadline to get the tax credit is December 1, 2009.
There are two ways to turn your tax credit into funds you can access during the purchase process of your first home. as a first-time home buyer that is eligible for the tax credit, you can either get a bridge loan or sell your tax credit.
Bridge Loan
With a bridge loan you can get access to the $8,000 tax credit for first-time home buyers to help with the purchase of the home. The bridge loan provides you with the tax credit funds in advance with a typical expected repayment during the first half of 2010.
Sell Tax Credit
Home buyers can choose to sell their tax credit to the lending institution, or another financial institution, who will file for the credit on your behalf.
Which ever method you use to monetize the $8,000 tax credit, you must still come up with 3.5% for the down payment from your own funds. Monetizing the tax credit allows you to use the funds towards closing costs and/or increasing your down payment above the minimum 3.5%. By applying the tax credit toward your down payment, you can lower your mortgage payments for the long term, putting you in a better financial position to remain in your dream home.
The exception is tax credit loans made through state and local housing finance agencies, government agencies, and some non-profit groups can be used to cover the minimum 3.5% down payment. Check with your local credit union to see if they have the information you need for your state. Some credit union's are working with state agencies to make these loans quick and simple. New Mexico Educator's Federal Credit Union offers a Tax Credit Loan that must be paid off by June 30, 2010. The Tax Credit Loan Program is paired with a 30-year fixed rate New Mexico Mortgage Finance Authority first mortgage loan, which provides long-term, sustainable homeownership.
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