Creative Ways to Tap Home Buyer Tax Credit

This could be the best opportunity to buy a home in many of our lifetimes.  The challenge is that there are many that would like to buy a home, but don’t have a down payment to do so.  In Michigan, there’s no way to get the credit at the closing table to use for the down payment.  So, buyers have to get the down payment in other ways and then AFTER closing, file for the tax credit with the IRS.

Where can a typical home buyer find the down payment funds for an FHA mortgage?

• GIFT – FHA allows the down payment, and all funds to buy a home, to be from any blood relative or someone that has a vested interest in the buyer’s well-being. 
• BONUS – An employer can choose to give a valued employee a bonus and that bonus can then be used for the down payment.  A bonus can also be given sooner than normal so that a buyer can purchase a home.
• RETIREMENT PLAN LOAN – most 401(k), 403(b), ROTH IRAs, etc. allow a loan or a premature distribution to be taken out for the purpose of buying a home.  Check with your plan administrator or tax advisor regarding possible tax consequences.
• GRANT – there are many organizations that will give a home buyer a grant to buy a home.  Check with friends & family for the availability of these programs.
• LOAN AGAINST AN ASSET – just as one can use a loan from a retirement asset for a down payment, so can you also use the proceeds from a loan against any asset you own.  Just make sure the asset’s ownership & value is documented and that you don’t get the loan from a relative or interested party.
• SALE OF ASSET – you can sell a motorcycle, boat, car or just about anything and use the funds for a down payment.  Make sure the asset’s ownership & value is documented – you’ll need a bill of sale and a copy of the check from the buyer of the asset.
• LIFE INSURANCE POLICY – many life insurance policies allow for borrowing against their built up cash value. 
• HOME EQUITY LINES OF CREDIT – if you currently own a home and are looking to buy your next one, you can tap into the equity in your current home for the down payment on the next one.  Again, check with us before acting on this to be sure you meet all qualification requirements for the new mortgage.

 

Call Mary LaCroix at (248) 877-8587 or email me at mlacroix@firstmichiganbank.com