In May 2009, the U.S. Department of Housing and Urban Development (HUD) announced that taxpayers could monetize the first-time homebuyer credit. Taxpayers financing through a state housing agency or other HUD-approved advance programs can monetize 100 percent of the down payment. Taxpayers using Federal Housing Administration (FHA) lenders can apply the credit to closing costs or make a larger down payment above the FHA required 3.5 percent minimum.

HUD’s authorization for monetizing the credit has no sunset date.

Additionaly, since the credit was recently extended and expanded to non-first-time home buyers, it appears that the non-first-time home buyer credit can also be monitized under the same HUD guidlines.

Please see Page 2 of the CCH Tax Briefing on the Worker, Homeownerhsip, & Business Assistance Act of 2009.

In a word, No.

Tom

Q. Can a taxpayer claim the first-time homebuyer credit after entering into a contract for the purchase of a residence but before closing on the purchase?

A. No. Taxpayers cannot claim the credit before there is a completed sale and purchase of the residence. The sale and purchase are generally completed at the time of closing on the purchase. (New 7/2/09)

http://www.irs.gov/newsroom/article/0,,id=206291,00.html

Added: Thanks Brent. Thanks, Brent. Specifically, that program allows the taxpayer to get a tax credit advance, secured by a second lien, to be applied to the down payment and/or closing costs. If they want to do something else with the money, they have to close first.

http://www.ncsha.org/resource/hud-mortgagee-letter-2009-15-using-first-time-homebuyer-tax-credit