The information out there is confusing. I’ve read you can and you can’t use the $8000 tax credit as a down payment when buying a house.
I recommend a buyer talk to their trusted lender to find out what programs are available to buy a home. Most likely, if it sounds too good to be true, it is. If you don’t have a trusted lender, ask for a referal from someone you know. When dealing with someone you don’t know, check references, look up their business license, look up their company name on the Better Business Bureau, check with your local Chamber of Commerce or Angie’s List.
I’ve heard credit scores are vital when purchasing a home today. Apparently credit scores are more important than how much money you have for a down. You could have a large down, but if your credit score isn’t adequate, you may have trouble getting a loan. An idealistic credit score is 720 and above, although FHA and VA are more liberal regarding credit scores. I’ve heard lenders are requiring higher credit score standards when lending for investment property.
I’ve also been told several stories about people that put large amounts of money down on homes during the housing boom and later, when their home value dropped, they walked away expecting the bank to take their loss. Since banks are in business for a profit, it is now harder to get the banks to forgive a debt when they release the home (as collateral) on a loan if there is still a balance owned. Today, some banks are leaving themselves a window (in the small print) to allow them to continue to pursue any balance owed after a home is sold to the next buyer in a short sale (sold for less than is owed). More banks are unwilling to absorb all the real estate losses, so they are going after the person that didn’t pay off their loan they promised to pay at closing (all buyers sign a promissary note promising to pay their loan back).
Remember, when in doubt, consult with a real estate attorney to find out what the small print means.