The U.S. Department of Housing and Urban Development (HUD) announced today 5/29/09 that the first-time homebuyers $8,000 tax credit can be used for the down payment with one caveat - the buyer still has to put down the minimum 3.5% and THEN the $8,000 credit can be used to increase the down payment, cover closing costs, or even buy down the interest rate.
Again, the credit cannot be used to cover the minimum initial 3.5% down payment.
Buyers would apply for a bridge-loan from an approved FHA-approved lender and be able to use the tax credit monies as mentioned above.
Here is a link to the HUD guidance released today. Mortgagee Letter 2009-15
Any buyer who qualifies for the tax credit should consult his mortgage banker as well as tax professional.
Reminder to buyers: You must close on the property you're purchasing prior to December 1, 2009, in order to get the $8,000. Time flies! Don't wait too long!