HUD announced last week that it would allow first-time homebuyers to use the 2009 $8,000 tax credit as their down payment for FHA loans. The $8,000 credit would go a long way in helping people come up with the 3.5% down payment requirement for an FHA loan.

A few days later they rescinded their announcement.

Our Washington legislature has approved a program that would allow the state treasurer to establish a $25 million line of credit to supply homebuyers with a short-term loan against their tax credit to use as a down payment. It looks like that program won’t be of any use now, unless HUD changes it’s mind.

It’s important to remember that the $8,000 tax credit is still a great incentive to buy a home this year. With FHA, the 3.5% down payment can be a gift from a family member, money from a 401K or similar account, employee contributions from employer, government agencies, and FHA-approved non-profits.

Stay tuned…