Can the tax credit be utilized towards the down payment?
Yes, but only after the first time home buyer has provided the initial 3.5% FHA down payment. After that, additional down payment funds can come from the tax credit. Can the tax credit be utilized to pay buyer’s closing costs? Yes, the tax credit can be utilized for normal fees associated with buying a home such as closing costs and buying the interest rate down. (points) Can the buyer obtain the tax credit upfront? Yes, but there are several requirements which follow: Purchase of the tax credit may be by a non-profit organization or a Federal, State or Local government agency. Proceeds of the tax credit may not exceed the anticipated credit due by the home buyer. The borrower must submit a signed certification that the tax credit is not subject to offset other indebtedness, such as student loans, etc. A copy of the borrower’s tax refund and IRS 5405 must be collected and retained in the FHA case binder. Any costs associated with the purchase of the tax credit should be no more than 2.
