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Where to use your $8,000 Tax Credit with your FHA loanIf you are an eligible for an FHA loan and you are a first time buyer, you can:

• Use the $8,000 tax credit for closing costs, escrow charges, higher downpayment, or to "buy down your interest rate so that you can have a lower monthly payment

Eligibility.   Here's how you can determine if you qualify:

• You must be a first time buyer in the sense that you have not owned a primary residence during the last three years
• Your household gross income cannot exceed $95,000 if you are a single taxpayer, or $170,000 if you are a married couple filing jointly
• You are submitting an offer on a house you can afford to buy
• You are applying for a mortgage through an FHA-approved lender
• Your home purcase must close escrow between January 1, 2009 and November 30, 2009.
• And you must invest a minimum of 3.5% of purchase, from your own funds (which can be from your savings and gifts from relatives)

What you need to do: Complete your FHA application

• Complete the IR form 5405 --- this is your request to the federal government to send you a tax credit check.
• You can also file an amendment to your 2008 return to get your tax credit or file it on your 2009 taxes. You can download Form 5405 at www.IRS.gov
• Prove that you have no outstanding civil judgments, liens, unpaid taxes and other obligations that may eliminate the tax credit
• Prove that you are not subject to having your wage garnished that may affect how much of a tax credit you will receive

Frequently asked questions about the home buyer tax credit  For more information, check out the FAQ from http://www.federalhousingtaxcredit.com/2009/faq.php 

The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.

The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

1. Who is eligible to claim the tax credit?
2. What is the definition of a first-time home buyer?
3. How is the amount of the tax credit determined?
4. Are there any income limits for claiming the tax credit?
5. What is "modified adjusted gross income"?
6. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
7. Can you give me an example of how the partial tax credit is determined?
8. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
9. How do I claim the tax credit? Do I need to complete a form or application?
10. What types of homes will qualify for the tax credit?
11. I read that the tax credit is "refundable." What does that mean?
12. I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
13. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
14. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
15. I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
16. I am not a U.S. citizen. Can I claim the tax credit?
17. Is a tax credit the same as a tax deduction?
18. I bought a home in 2008. Do I qualify for this credit?
19. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
20. The Secretary of Housing and Urban Development has announced that HUD will allow "monetization" of the tax credit. What does that mean?
21. If I'm qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
22. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?

Source:http://www.federalhousingtaxcredit.com/2009/index.html