Exciting news! It was just announced that the (up to) $8,000 tax credit can be applied toward closing costs for FHA home loans! Before the May 29th, 2009 announcement, first-time home buyers could amend their 2009 tax return to receive the government money after closing on their first home OR they could wait until they file their 2010 taxes and claim their money then. With this bold new change, FHA buyers can use this money when they may need it the most: AT CLOSING!
Closing costs in Washington State run buyers approximately 3% and include costs such as title insurance, half of the escrow fee, pro-rated interest and property tax, and pro-rated utilities. Buyers do not pay real estate agent commissions unless they have agreed to this in writing, under a special circumstance. For a list of items FHA buyers do not have to (read: cannot) pay for, click here.
At this time, this cash-advance for closing costs is only available to FHA buyers. Conventional mortgage programs do not have this kind of offer associated with them. There are groups working on getting approval for conventional loans, but for now just FHA buyers can get their tax gift at closing.
For more information, please visit the HUD (U.S. Department of Housing & Urban Development) web site and read this article. This online article from the Seattle Times has additional information. Here is an article from yesterday's LA Times that also explains the change.
Would you like more information about the first-time home-buyer tax gift? Read this blog post. This blog: FHA Loan Limits shows today's FHA loan limits. Basically, if an FHA buyer is purchasing a property, it must not cost more than the FHA loan limit.