Many States Already Monetizing Tax Credit

Many states have already started making bridge loans available to households who want to claim the First-Time Homebuyer Tax Credit! With the announcement earlier this week that the U.S. Department of Housing and Urban Development will allow consumers to obtain a bridge loan, repayable with proceeds from their tax credit, to help cover their down payment, consumers are anxious to "get movin’".

HUD Secretary Shaun Donovan stated that guidelines for the new policy will be released shortly. But even before the announcement, nearly a dozen states were one step ahead of the department by providing similar bridge loans through their housing finance agencies.

Many state REALTOR® associations were behind these proactive efforts and worked with state officials to set up programs. The Washington REALTORS® association was able to convince treasury officials that the money loaned to home buyers would not only be paid back when tax credits took effect, but also increase the state’s funds. According to their calculations, every 1,000 home sales represented approximately $140 million in new tax revenues. To help close the deal, the association put up $400,000 to help cover the risk. Thus far, the initiative has been successful, with thousands of loans granted to first-time home buyers.

There are currently 10 states that have a program similar to Washington’s, and that number is expected to increase following Secretary Donovan’s announcement.

This is great news for first-time homebuyers that want to use their tax credit as a down payment!