Tax Credit for Home Buyers Now Monetized

First-time home buyers now have an even greater incentive to purchase a home in today’s market – the $8,000 tax credit made available by the federal government can now be monetized.  That means the tax credit can used as “real money” toward down-payment expenses or certain closing costs.                                                                                     

Monetization is the act of converting something into money.  In the context of the first-time home buyer tax credit, monetization means the tax credit is to be treated as if it were cash, allowing it to be used as a payment for certain closing and down-payment expenses.

Meeting the down-payment on a home is probably the No. 1 reason most potential home buyers are deterred from their dreams of owning of a new home; however, being given as much as $8,000 from the federal government to go toward this initial payment is a tremendous relief.

U.S. Housing and Urban Development Secretary Shaun Donovan announced this change in the tax credit plan at the end of May 2009 in an effort to further energize the nation’s housing market.  National economists estimate an additional 40,000 homes will be purchased nationally by allowing this tax credit to be applied toward the purchase of an FHA-insured mortgage.  That is in addition to the 160,000 new sales overall that were originally expected to be spurred by the $8,000 tax credit offer!

Here in Louisiana, we’re getting reports from builders and real estate members that activity has increased in the past couple of months, resulting in more sales and more contracts for new home construction.  Many experts anticipate this “greater incentive” from the federal government could further increase traffic and sales.

There are a few important things for first-time homebuyers to consider when they’re seeking out this tax credit opportunity.  First, any lender can offer a program that would permit the buyer to apply the tax credit to funds needed for a loan that is obtained in conjunction with a home purchase; however, only the Federal Housing Administration (FHA) has issued guidance regarding the monetization of the first-time home buyer tax credit in conjunction with FHA-insured mortgage loans.  Second, additional information on how to receive and apply the tax credit is available with the Louisiana Housing Finance Agency at 225-763-8700.  Finally, a professional home builder or realtor can help direct you through this process.

For more information on the federal tax credit and why now IS a great time to buy a home in Louisiana, visit the website www.LAhomeownership.com.  Please feel free to contact a member of the Louisiana Home Builders Association in your area to further service you. -Phil Hoffman, President, Louisiana Home Builders Association