Don't Get Too Excited About Tax Credit Bridge Loan.

Surely by now we have all heard about the $8000 Tax Credit being offered to first time home buyers. If you haven't just look back in our Blog archives and you will find some good educational content regarding this exciting credit. Shortly after the credit became available MHDC started offering a "bridge loan" that allowed people to tap into the credit early. They would advance the borrower the majority of the $8000 so it could be used for a down payment etc. Then when the borrower receives the actual credit, the bridge loan would be paid off. Now the government is stepping in and getting the word out on some FHA changes that will allow lenders to do the same thing. This news has generated more buzz as the word spreads. Just don't get too excited about this, because the details are sketchy at this point and lenders are doing their due diligence to see if it is something feasible to offer. The way I see it, this is a very risky thing for a lender to take on. The lender is fronting the money and hoping it gets paid back. I don't see too many lenders jumping on board. I know we cannot offer this at the present time. That isn't to say we won't evaluate this again in the near future as more details come out. The MHDC program comes with a higher rate than FHA so most people are not even bothering with it. FHA only wants 3.5% down so most borrowers have that anyway and they just sit back and wait for the $8000 perk later. Another way to look at it is this. With everything going on in today's economy, I would recommend stashing that money away in liquid savings or investing it rather than plopping it down on your home. That amount of money will not make a huge difference in your payment or avoid monthly mortgage insurance. Most first time home buyers don't think about the expenses that can come up in owning vs. renting. When that furnace goes out, it is on you. Do you have reserves to cover such an issue? When that money is not in your savings and is in your home equity, tapping into you equity is next to impossible in today's lending environment. Just some food for thought. We will definitely keep you posted as more details come available!



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