$8,000 First Time Buyer Tax Credit can now be used for closing costs
On May 29th U.S. Housing and Urban Development Secretary Shaun Donovan announced that FHA will now allow the first time home buyer credit from the American Recovery and Reinvestment Act of 2009 to be applied towards the purchase price of an FHA insured home. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs.
What this means to the first time home buyer is that closing costs, discount points to buy down interest rates, or additional down payments can be paid out of this credit, reducing the out-of-pocket cash needed to buy a home.
According to estimates by the National Association of Home Builders, 160,000 home sales across the nation will be generated because of this. (101,000 first-time home buyers will receive the credit, and 59,000 existing home owners may purchase another home becuase a first-time home buyer purchased their home.)
Additional tax information is available here from the IRS.