Catherine Nesset's Real Estate News

WASHINGTON — Thousands of first-time homebuyers will be able to get short-term loans so they can quickly make use of a new $8,000 tax credit that was designed to boost the battered U.S. housing market.

The Federal Housing Administration on Friday released details of a plan in which borrowers who use FHA loans can get advances from lenders that effectively let them receive the credit before they complete their taxes.

The FHA had no estimate of how many borrowers would qualify. But the agency, which backs about a quarter of new home loans, is projected to guarantee about 2.2 million loans in the next budget year.

Borrowers can claim the credit by filing an amended 2008 tax return or can wait for their 2009 return.

The change "will present an enormous benefit for communities struggling to deal with an oversupply of housing," Housing Secretary Shaun Donovan said in a statement.

Borrowers will still have to come up with the FHA's required 3.5 percent down payment, unless they work through a state or local housing program. But officials say the money can still be used for closing costs or a larger down payment.

The tax credit was included in the economic stimulus package signed by President Barack Obama in February.

___

May 29, 2009 - 10:40 a.m. EDT