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Yes, you can use your $8,000 tax credit as a down payment for your first home.

Home buyers qualifying for an FHA insured mortgage will now be able to use the new "first-time home buyer" $8,000 tax credit as a down payment. Shaun Donovan, US Department of Housing and Urban Development secretary announced on Tuesday.

The process of applying this tax credit toward the down payment is called "monetization." It allows FHA-qualified borrowers to use the tax credit to obtain a government insured mortgage.

Donovan made the announcement at a National Association of Realtors legislative summit Tuesday morning, although HUD's details on the initiative aren't scheduled for official release until next week. (Don't bother checking www.hud.gov just yet.)

This initiative will allow FHA-approved lenders to monetize the tax credit through short-term bridge loans, letting borrowers access the funds at the closing table.

"We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment," Donovan said, according to NAR.

The tax credit is 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 upt 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 the 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.

There is an enormous inventory of vacant, foreclosed, bank-owned or short balance homes for sale out there. In addition, interest rates continue to be very favorable. The tax credit expires in November 2009, rates will go up eventually and home prices are sure to rise with an improving economy. There should be no doubt that today is possibly the best time to buy a home. 

The time to get off the fence and take advantage of our current market has arrived.