Home buyers qualifying for FHA-insured mortgages may soon be allowed to use the new first-time home buyer $8,000 tax credit as a down payment. The process of applying the tax credit toward down payment, called monetization in the mortgage industry, allows for FHA-qualified borrowers to use the tax credit to obtain a government-insured mortgage.
The tax credit arrived as part of the American Recovery and Reinvestment Act of 2009 for qualifying taxpayers that buy homes in 2009. The law states that qualifying home buyers may claim up to $8,000, or $4,000 for married individuals filing separately, on either their 2008 or 2009 tax returns. Unlike the previous law which required recipients of the tax credit to repay the funds over a number of years without interest, the new home buyer credit effective with the passage of the act does not have to be repaid.