Tax credit can be used for down payment

The Federal Housing Administration has issued formal guidelines allowing first-time homebuyers to apply a federal tax credit of up to $8,000 toward the purchase of a home with an FHA-backed mortgage.

The bad news, for those hoping that the initiative would allow homebuyers to buy a home with nothing down, is that the tax credit can't be used to meet the FHA's 3.5 percent minimum down-payment requirement.

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