NAHB Answers How to Pay Upfront Costs With Tax Credit

From a recent article published in Nations Building News- The Official Online Weely Newspaper of NAHB. If you have questions about your individual situation contact Zach Schabot at

NAHB is providing answers to frequently asked questions from prospective first-time home buyers who qualify for the $8,000 tax credit and are seeking information on how they can get a loan to help cover downpayment or closing costs.

The U.S. Department of Housing and Urban Development announced on May 29 that the Federal Housing Administration will allow state housing finance agencies to provide second mortgages "monetizing" the tax credit so that borrowers can use the funds for upfront costs for the purchase of homes with FHA-insured mortgage loans.

"This is great news for thousands of families who want to take advantage of today's low interest rates, competitive prices, great selection and the federal tax credit that is only available until Nov. 30, but could not save enough money for a downpayment and closing costs," said NAHB Chairman Joe Robson.

HUD announced that FHA-approved lenders can purchase the tax credit from the home buyer in advance, so that the home buyer can use the funds for closing costs or make a downpayment in addition to the 3.5% minimum. Home buyers who go directly to FHA-approved lenders still need to come up with the 3.5% minimum downpayment that is required for an FHA-insured loan.

Home builders in recent weeks and months have reported that the tax credit has helped bring more prospective first-time buyers into the marketplace. To spread the word, builders and home builders associations around the country have been providing consumers with information on the availability of the credit.

The new FHA monetization program is expected to result in an additional 40,000 home sales, many of which will be made to trade-up buyers who have been able to sell their existing home to a first-timer.

For NAHB's FAQ PDF on monetization, click here. Builders can direct consumers to this information by sending them to The new PDF can be found by going to the "Frequently Asked Questions" section of this site and scrolling down to question 20.