Can the $8000 tax credit be used as a down payment????

Can the $8,000 tax credit to be used as a down payment???

Early last week Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development said that FHA is going to permit its lenders to allow homebuyers to use the $8,000 tax credit as a down payment. FHA also issued Mortgagee letter 2009-15 regarding this subject.
But not so fast…..shortly thereafter Mortgagee Letter 2009-15 was removed from HUD’s website.

There are two key questions surrounding this issue. First, will HUD re-post the 2009-15 Mortgagee letter outlining the guidelines for this, and second will lenders accept loans under these new guidelines. Both of these questions remain unanswered at this time.

We have seen several cases where lenders adopt underwriting guidelines that are more conservative than what HUD allows. For example HUD allows credit scores as low as 580 while most lenders now have a 620 minimum score. We also know that HUD used to allow sellers to pay the buyers down payment via the Nehemiah or AmeriDream programs and these loans had nearly three times the default rates as compared with loans where the buyer paid their own down payment. For these reasons there is much uncertainty as to when or if both HUD and the lenders will allow the tax credit to be used for a down payment.

What is certain is that we’ll keep you up to date as more facts are known.