Buying a home: can I use the $8000 tax credit as my down payment?

[NickB79]

The house we're looking at requires $7500 down to satisfy the 3.5% requirement of an FHA loan. I know I can apply the $8000 tax credit to my down payment along with the $7500 minimum for a total of $15,500 down, but can I use it entirely as the down payment if I don't want to tap my savings account and put down only $8000 instead?

I can wait until Friday to ask this question to our mortgage consultant, but it's been bugging me all weekend. Anyone here know for sure if I could do this? It's no big deal if I can't, but it would be nice to hang on to the extra $7500 as a psychological safety blanket for the first few months.

Also, would you apply the $8000 this year towards the down payment, or put it into a savings account next spring to supplement the emergency fund?

[lindisfarne]

1. You can, but it's going to cost you. You have to take out a higher interest loan in anticipation of

getting the $8,000. I'd tap your savings account - because I'm guessing you don't get as much interest in it as you'd pay on the loan. You can revise your 2008 taxes to get your $8,000 early - and you can also adjust your payroll withholding in anticipation of getting the credit on your 2009 taxes.
Google to get more details - the info is out there.
Try limiting the site to irs.gov for the tax-specific info, but for the loan, you'd have to have a broader search.

"Currently, borrowers applying for an FHA-insured mortgage are required to make a minimum 3.5 percent downpayment on the purchase of their home. Current law does not permit approved lenders to monetize the tax credit to meet the required 3.5 percent minimum down payment, but, under the terms of today's announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate. Buyers financing through state Housing Finance Agencies and certain non-profits will be able to use the tax credit for their downpayments via secondary financing provided by the HFA or non-profit. In addition to the borrower's own cash investment, FHA allows parents, employers and other governmental entities to contribute towards the downpayment. Today's action permits the first-time homebuyer's anticipated tax credit under the Recovery Act to be applied toward the family's home purchase right away. Unlike seller-funded down-payment assistance, which was a vehicle for abuse, this program will allow homebuyers to shop for the best home price and services using their anticipated tax credit."
http://www.hud.gov/news/release.cfm?content=pr09-072.cfm

[katanalori]

2. FHA - appears so!

"US Housing and Urban Development Secretary Shaun Donovan announced that the First Time Home Buyer Tax Credit would be able to be used for down payments and closing cost. In a press release Friday, HUD has officially confirmed that the first time home buyer tax credit is now approved for use by FHA approved lenders for down payments and closing costs. "

http://www.newhomebuyingblog.com/home-buying/hud-confirms-8000-tax-credit-can-be-used-for-down-payment/

[PVnRT]

3. If you qualify for an FHA loan, go for it

They only require 3.5% down (so $8,000 will go a long way) and generally have decent rates if your credit is good. I don't know if you can use it for a non-FHA loan, but you may be able to.