As part of the recently enacted Housing and Economic Recovery Act of 2008, first-time homebuyers who purchased after April 8, 2008, or who will purchase before July 1, 2009, can qualify for a tax credit of as much as $7,500. You can bet that real estate agents will use this as a way of telling you “how much more you can afford.” But know this: Although it’s called a tax credit, it’s not the same as the stimulus check you received last year. You must pay this credit back, and unlike defaulting on private debt, skipping out on this loan carries the same penalties as avoiding paying your federal taxes.
On the plus side, it’s interest-free, and if you sell your home at no gain or at a loss, your remaining payments might be reduced or eliminated. For details, see http://www.irs.gov/newsroom/article/0,,id=186831,00.html.