The big story is that it is not a credit. It is a loan, and you are going to have to pay it back, so you’d better make sure that you have the money.
If you claim the credit, you could end up with some tax issues a couple of years down the road because of the tax liability, and if you sell the house, there is a possibility that you could have a bigger tax bill.”

Don’t sweat if if you didn’t get approved. It’s just a loan.
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It is not a tax credit anyways – but a loan – you have to pay it back (just wanted to mention that in case you didn’t know) – and you should qualify for it – I was under the assumption that as long as you bought a home that you could get the extra 7,500 (15,000 if you are a couple). I would talk to your mortgage company – we too have an FHA loan – but don’t plan on applying for the Tax credit (because we don’t want to owe the government money).

I would call your mortgage company and have them explain to you why you don’t qualify. And by explain, I mean have them go through every little word and explain what it means. I hate when I call places and they repeat to me what was in the letter, I don’t know all the legal terms, why do they think I called in the first place!

Good luck! That really sucks, we have FHA too, so I’ll be looking out for any bad news letters.