First Time Homebuyer $8000 Tax Credit can be used for Down Payment!

FHA has announced a first time home buyer may now amend their 2008 Federal tax filing and apply for the $8,000 tax credit. They go to http://www.irs.gov/ and fill out form 5405 to request the refund. A check will be sent and these funds may be used in conjunction with the purchase of a property. The borrower needs to use FHA financing for the new financing. This program would not make sense for a borrower with a down payment of 20% or more.

The minimum down payment is 3.5% Here is the change. It was first reported the tax credit could be used for the down payment but FHA changed the intitial release now saying the credit cannot be used for the 3.5% down payment. If the borrower wants to use it as additional down payment, that's fine. However, the down payment may be a gift from relatives. The tax credit may be used for closing costs and buying the interest rate down. Note, there is a section that says a non-profit agency or a state housing program can advance the credit in the form of a second.

An important fact to keep in mind is the deadline to receive the tax credit is 11-30-2009. The close of escrow must be on or before this date for the first time buyer to be eligible to have the tax deduction of $8,000.