Before you can participate in the VA streamline program, you first must be in a VA loan – and many people today are wondering if it is possible to use the 8000 Tax Credit as a down payment.
Even though the VA loan program allows you to finance all closing costs and down payment, some people may still be interested in using their 8000 tax credit as a way to pay for these instead.
And now with the official announcement from HUD in Mortgagee Letter 2009-15, the guidelines have been established and are quite reasonable. One of the questions that most people ask is “how much will it cost to monetize the 8000 tax credit at closing?” and the answer is that according to the guidelines established, it should be no more than 2.5% of the credit. From the official Mortgagee Letter:
Any costs attendant to the purchase of the tax credit are to be nominal and discounting the anticipated credit to cover the costs and expenses of the transaction must be reasonable and disclosed to the homebuyer. In FHA’s view, fees and costs that total more than 2.5% of the anticipated credit are considered excessive. (Example: $6000 to be refunded, with all fees and costs discounted, borrower should receive not less than $5850.00 for sale of tax credit.)
The real question is “does it make sense to pay the money to monetize the $8000 tax credit when getting a VA loan?” and the question is one that you should pose to your loan officer. They will be able to give you the pros and cons of using the 8000 tax credit for your down payment or closing costs — and then you can easily decide for yourself.