(UPDATED) FHA to Allow $8K Tax Credit as Downpayment (RETRACTED)

UPDATED 5-14-09 I’ve have learned that the Office of Management & Budget has asked the FHA to (at least) hold off on implementing this program. The FHA’s bridge loan program is only a proposal at this time. I’ll keep you posted…

There is great news for first time home buyers… HUD Secretary Shaun Donovan said that the Federal Housing Administration (FHA) is going to permit its lenders to allow first time home buyers to use the $8,000 tax credit as a downpayment.

Donovan made the announcement today at the National Association of Realtors (NAR) Midyear Legislative conference in Washington, DC. “We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a downpayment,” Donovan said.

According to Donovan, the FHA’s approved lenders will be permitted to “monetize” the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.

Not sure what the cost of the bridge loan to home buyers will be. I have calls out to various lenders/loan officers now to see what I can dig up – I’ll keep you posted.