The Federal Housing Administration will allow the new $8,000 first-time homebuyer tax credit to be applied directly toward home purchase costs when using an FHA-insured mortgage, the Department of Housing and Urban Development said on Friday.

The plan to monetize the tax credit up-front is aimed at more quickly stabilizing the housing market, HUD Secretary Shaun Donovan said in a statement. But in detailed rules, the FHA will still require home buyers to provide a minimum 3.5 percent downpayment from other sources.

(Reporting by David Lawder; Editing by Theodore d'Afflisio)