FHA Loans With No Money Down Available In 15 States

by Peter G. Miller
September 16th, 2009

Earlier this year, after some confusion, it was finally determined that the $8,000 tax credit for first-time home buyers could be used for an FHA mortgage down payment. Since the house purchase would come before the credit, there had to be some mechanism which would allow the buyer to borrow that money. Ultimately HUD determined that a loan against the $8,000 tax credit would be okay if it came from a state agency or a non-profit group. However, if the money came from a private source then it could be used to reduce the loan amount — but the borrower would still need to come up with down payment money.

At the time all of this was going on I said that “a lot has been made of the $8,000 tax credit and how it can be combined with FHA financing to buy a home with nothing down.

“If you would dearly like such an arrangement to be widely available, that just isn’t the case today and won’t be the case tomorrow.”

Well, tomorrow is pretty much here. The $8,000 first-time buyer credit is scheduled to end December 1st, though I expect that it will be continued into 2010. In any case, FHA deals with no money down and state help are hardly common.


For states to advance money for first-time home buyers they must first have cash. And, as you look around the country, most states simply don’t have the dollars to help first-time buyers, regardless of how deserving or noble they may be. Moreover, even the states willing to fund FHA down payments do not have unlimited resources, so the number of first-timers who can be helped is limited.

There are now 15 states which have official programs for first-time home buyers. Those states include:

___ Colorado

___ Delaware

___ Idaho

___ Illinois

___ Kentucky

___ Massachusetts

___ Missouri

___ Nebraska

___ New Jersey

___ New Mexico

___ Ohio

___ Pennsylvania

___ Texas

___ Tennessee

___ Virgina

(For direct links to state programs, go to the National Council of State Housing Agencies.)

Notice that the states with the biggest inventory and foreclosure problems — California, Florida, Nevada and Arizona — are not on the list.

Well, okay, what about non-profit groups.

In theory non-profits could step in and advance the money. However, in the same way that state coffers are running on empty, the same is largely true with non-profit groups. Demand for charitable services is up while funding has taken a beating.

Various real estate industry groups would like to see the first-time buyer credit increased to $15,000. The chances of this happening are remote because such credits represent a cost to Uncle Sam, an uncle who by every standard is essentially broke. However, a continuation of the $8,000 credit is likely if not assured because of the need to reduce the enormous stock of unsold and distressed properties which hangs over many local markets and drives down area housing prices.

And a continuation of the first-time credit is only fair, after all, what else would we do with the money? Give it to a bank?

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This entry was posted on Wednesday, September 16th, 2009 at 12:49 am and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

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