First Time home buyer credit explained

I am buying my first home, how do I qualify for the first time home buyer credit? What things should I know when purchasing my first home?

If you are looking to take advantage of the first-time home buyer credit, the first thing you need to know is that time is running out. First-time home buyer credit is only available on home sales closed before July 1, 2009.
Having got that clear to begin with now what exactly is the ‘first-time home buyer credit’? First and foremost it is a tax credit. This means that it will be paid back to you by the government because you paid it in the first place through your taxes. The first-time home buyer tax credit is up to one tenth of the price you pay for your first home. But there is a ceiling on the amount of this credit and that is $7500. A single person (or a married person who files their tax return as though single) buying a house has the tax credit capped at half this amount
The best way to think of the first-time home buyer credit is as a loan. Most importantly, because this is what makes it worthwhile, is that it is an interest free loan. Yes you have to pay it back, but it is really easy to do this. Two years after you get the money you start the repayment installment plan. The repayments will be taken in tax deductions and means $500 every year for 15 years.
If you sell your house you would of course be required to repay the outstanding balance from the proceeds of your sale. If you didn’t make any money on your sale you would not be required to repay the balance. If you die before the tax credit is paid back in full the debt dies with you.
The aim is to help people on lower incomes to own their own homes so if you earn over $75,000 gross (modified and adjusted) the tax credit begins to reduce. For couples the earnings threshold is $150,000. Over $95,000 for singles and $170,000 for couples and you can forget the first time home-buyer credit altogether.
A word of caution is to never borrow more than you can afford to repay. This is the basic cause of the financial crash of 2008 with the so-called ‘subprime’ real estate loans.