Columbus HUD Homes

A couple of days ago the  Secretary of HUD announced that first time buyers will be able to immediately take advantage of some or all of the $8000 tax credit. The good news is that these advances are short term loans made by your FHA lender and will be available at closing. The bad news is that you can’t use this money to cover the 3.5% down payment required for an FHA loan.

Read the original news release from HUD …

In a nutshell, this change in policy is basically useless for Ohio borrowers. Here’s why:

You still won’t be able to buy Columbus houses with no money down, if you want to use FHA financing. You will need to come up with 3.5% of the purchase price in cash at closing unless you are buying Columbus HUD homes with $100 down. You may borrow the 3.5% from your family or employer – that’s permitted under the program – and pay it back when you get the tax credit from the IRS. Or, you can receive a gift from a family member for the 3.5% down.

What most people don’t realize is that they don’t have to wait until next year to claim their income tax credit. Instead, you can file an amended tax return immediately after closing on your home and receive the $8,000 tax credit refunded within 30 to 60 days. So, even though you still may need the cash for the down payment you only need it for one or two months.

In addition, the State of Ohio already implemented a program through  OHFA that allows first time buyers to get a short term loan from the State to cover closing costs and down payment. This loan does not have to be paid back when you receive your tax credit and you may keep it as a second mortgage.

The third reason why the new policy won’t help you much is the fact that the short term loan proposed by HUD would only cover closing costs or additional down payment beyond the required minimum amount. It has been our experience that basically all sellers, including HUD, will pay for 2% to 3% of a buyer’s closing costs. Therefore, together with the property tax pro-rations pretty much all of the buyer’s closing costs are covered by the seller – no need for this loan.

As long as you qualify for FHA financing, even if you really don’t have access to any cash at all and don’t plan on purchasing a HUD owned property, you should take advantage of the Ohio program. Borrow the down payment from the state. Then file an amended tax return right after closing to pay back the short term loan or claim up to $8,000 in cash from your income tax refund and invest it back into the house for furniture, carpet or other needed repairs and upgrades.

Thanks for reading our Columbus HUD Homes Blog
Posted by: Susanne Novak, ABR, FIS, GRI 
Columbus Realtors specializing in
HUD Homes, Shortsales, Investment Real Estate
(614) 975-9650