***Update: No longer true. New post 5/20/09.
The US Department of Housing and Development has approved a plan which will allow qualified buyers to put their $8000 first time buyer credit towards their down payment. It must be used in conjunction with and FHA loan.
How the secondary financing works:
- 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 needed for the down payment, closing costs and prepaid expenses.
- The tax credit advance must provide that if the borrower does not repay the amount borrowed by the designated deadline, that principal and interest payments begin
- If payments on the tax credit advance are required, they must be included in qualifying the borrower and, when combined with the first mortgage, cannot exceed the borrower’s
reasonable ability to pay.
- If payments on the tax credit are deferred, the deferment must be for a minimum of 36 months in order for the payment to not be included in the qualifying ratios.
- The tax credit advance second mortgage must not provide for a balloon payment before ten years.
The full text of the letter and the qualifications cited above are here.