The FHA appeard to be allowing homebuyers to use income tax credits for their entire 3.5% down payment but concerns this too closely resembled seller paid down payment assistance cause them to re-define this program. 

Borrowers applying for an FHA loan will still be required to come up with a minimum 3.5 percent down payment, but will be able to use the tax credit for additional down payment or for other closing costs.

"Unlike seller-funded down-payment assistance, this program will allow homebuyers to shop for the best home price and services using their anticipated tax credit," HUD Secretary Shaun Donovan said in a statement.

Note:  Consider using this as an alternative when seller are unwilling to pay closing costs for their buyers like short sales & REO's.

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