Important Note: This new innovation has not been finalized. There is strong encouragement for the Feds to get this done.  However, there is no guarantee!

I recently got an e-mail that says basically the same thing from two different lenders — there is a move afoot to allow first-time home buyers to use the $8,000 tax credit as a down payment on their first home.  If this happens, it’ll be a huge boost to the housing market since most first-time home buyers fall into the moderate income range and really don’t have the type of cash needed to make the required 3.5% down payment for an FHA backed mortgage.

Below is an e-mail I received from Alan Gross of National City Mortgage:

At the National Association of Realtors® legislative summit’s meeting on May 12, 2009,  HUD Secretary Shaun Donovan announced a plan that would allow first time home buyers to use the $8,000 tax credit as a down payment.

“We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that cash can be used as a down payment. So FHA will permit trusted FHA-approved lenders and HUD-approved nonprofits, as well as state and local governmental entities to “monetize” the tax credit through short-term bridge loans. We think the policy is a real win for everyone, ensuring that borrowers can tap into numerous organizations that are already part of the FHA network to receive this additional benefit. FHA will be publishing details shortly.”

The $8,000 tax credit is available to first-time home buyers who purchase and settle on a home prior to December 1, 2009.

Allowing first-time home buyers to use the tax credit as a down payment will help stimulate the housing market. A major obstacle holding many buyers back is the lack of the up front cash needed to complete the purchase.

With home prices down and interest rates hovering at near record lows, 2009 will go down in history as one of the best home buying opportunities for both first-time and move-up home buyers.

Look for further details on this new programs as they become available.