On May 29, 2009, The United States Department of Housing and Urban Development released Mortgagee Letter 2009-15. "Using First-Time Homebuyer Tax Credits" was the subject of this opportunistic letter. In relation to The American Recovery and Reinvestment Act of 2009, first-time homebuyers might have an opportunity to obtain $8000 at the closing table for down payment assistance, closing costs and/or prepaid expenses.

Here is a direct quote from a section of that letter ---

II. FHA Tax Credit Guidance

Secondary Financing

Consistent with existing FHA policy, FHA will permit entities covered by Section 528 of the National Housing Act to use the current authority to offer tax credit advances with second liens in a manner consistent with the requirements in 12 U.S.C. 1709(b)(9). Eligible government agencies and instrumentalities of government are described in handbook HUD-4155.1 5.C3 and 5.C4.

Conditions:

• The tax credit advance when combined with the FHA-insured first mortgage may not result in cash back to the borrower.
• The second lien may not exceed the total amount needed for the down payment, closing costs, and prepaid expenses.
• Secondary financing may be "soft" (silent) or require a monthly repayment.

• If payments are required, they must be included within the qualifying ratios and, when combined with the first mortgage, cannot exceed the borrower's reasonable ability to pay.

• Payments must be deferred for at least 36 months to not be included in the qualifying ratios.

• If the tax credit advance loan has a short term for repayment, it must also provide that if the borrower fails to repay by the designated deadline, principal and interest payments begin automatically or the loan converts to a "soft" second.
• The secondary financing may not require a balloon payment before ten years.

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