The American Housing Rescue and Foreclosure Prevention Act of 2008, passed by Congress also includes an important tax break. First time homebuyers who purchase a home after April 8th, 2008 and before July 1, 2009 are eligible for a $7,500 tax credit. (if the home is less that $75,000, a tax credit equal to 10% of the purchase price).

The credit comes with a catch,however. You'll have to pay it back. The payback schedule is for 15 years at $500 per year. The tax credit reduces your tax liability on a dollar for dollar basis and can even boost your refund. If you owe $10,000 in taxes, you can take the credit and just pay $2,500. Or, if you owe $5,000 in taxes and have it paid over the year you can receive all of your money back with an additional $2,500.

This is the equivalent of an interest free loan from the government, perfect for the home buyer who might need to buy appliances, window coverings, landscaping,furniture,etc. that many first time homebuyers have a hard time working into their budget.