U.S. housing officials are working on a plan that would essentially allow some first-time buyers to purchase homes.  They would be able to put the $8,000 income tax credit for first time buyers towards their down payment on loans backed by the Federal Housing Administration.

The FHA is finalizing a program that would allow approved lenders, non-profits, and state and local governments to fund short-term loans that could be used as down payments to be repaid once the borrower received their tax credit.  Once they received their tax credit, they would pay off the short-term loan and put equity into their home.  

Several states have already instituted similar programs.  Housing Secretary Shaun Donovan outlined the plan Tuesday during a speech to the National Association of Realtors.  Secretary Donovan said that important changes, which the National Association of Realtors^® has been calling for, will help consumers purchase a home.  "We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment," Donovan said. 

According to Donovan, the FHA's approved lenders will be permitted to "monetize" the tax credit through short-term bridge loans.  This will allow eligible home buyers to access the funds immediately at the closing table.

Donovan said the Obama administration plans to further stabilize the housing market.  "I do think we have some early signs that the market overall is stabilizing," said Donovan.  "Since January we've seen both home sales moving up and down around a relatively stable number and we are seeing the first signs that the rapid decline in home prices is starting to abate."

California is still working on developing a program to assist the states first time buyers in utilizing their tax credit towards the down payment of a home.  I have contacted many of my FHA lending sources to find out more about how they will be rolling this program out and what kind of products they will be offering for this plan.  As soon as I know more, I will make sure I get the info out to the public.

* UPDATE - As of May 14, 2009, Mortgagee Letter 2009-15, which is about using the $8,000 first time buyer tax credit for a down-payment, has now been rescinded.  In other words, there is no program or loan product allowing first time buyers to use their $8,000 tax credit as their down payment.

However, an FHA approved lender may grant eligible borrowers a bridge loan using your anticipated $8,000 tax credit as collateral for payment of the bridge loan.  I have made several calls to many of my FHA lending sources and so far, I have not found one lending source that has any immediate plans to offer this option to FHA first time buyers.  I am still checking with some other FHA lending sources and if/when I find one, I will post it.

In the meantime, here are two other posts that go into details about this matter:

FALSE Info Flying Around About First Time Tax Credit as Down Payment - by Ken Cook

Using First-Time Homebuyer Tax Credits for the Downpayment - It's GONE !!!! - The story of the $8,000 tax credit - by Jeff Belonger