First-time homebuyer credits have some confusion surrounding them. Here is a breakdown for 2008 by Reuters. Qualified homebuyers can subtract the credit amount from their federal income tax when they buy the home and even get a refund if the credit exceeds the tax. However, they must pay the credit back over 15 years. The result is that the credit resembles an interest-free loan that must be repaid to the government. Here are the details:

• The home must be located in the U.S. and must be your principal residence (main home). You (and if married, your spouse) must not have owned another principal residence in the U.S. in the three-year period before purchasing the new home. Thus, the home doesn’t literally have to be your first home.
• The home must have been purchased from April 9, 2008 through June 30, 2009, inclusive.
• A special rule allows taxpayers who purchase a principal residence in the first six months of 2009 to treat the purchase as if made on Dec. 31, 2008. This allows the taxpayer to claim the credit for 2008 rather than 2009.
• The credit is equal to 10 percent of the price paid for the home, up to a maximum of $7,500. The $7,500 maximum credit applies both to individuals and married couples filing a joint return. A married individual filing separately can claim a maximum credit of $3,750.
• The credit is phased out for individual taxpayers with modified adjusted gross income (AGI) between $75,000 and $95,000 ($150,000 and $170,000 for joint filers) for the year of purchase. Taxpayers with modified AGI over $95,000 ($170,000 for joint filers) can’t claim the credit.
• In the second year after purchase, taxpayers who took the credit must start paying back the credit in equal installments over 15 years, with no interest charge.
• No credit is allowed if: the taxpayer or the taxpayer’s spouse was ever entitled to a D.C. homebuyer credit; the home purchase was financed through tax-exempt mortgage revenue bonds; the taxpayer is a nonresident alien; or the taxpayer disposes of the residence (or it ceases to be a principal residence) in the year of purchase.

According to a news release from Freddie Mac:

McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.96 percent with an average 0.7 point for the week ending January 15, 2009, down from last week when it averaged 5.01 percent. Last year at this time, the 30-year FRM averaged 5.69 percent. The 30-year FRM has not been lower since Freddie Mac started the Primary Mortgage Market Survey in 1971.

"Interest rates for 30-year fixed rate mortgages fell for the 11th straight week to another record low, due in part to the slowing economy and government actions," said Frank Nothaft, Freddie Mac vice president and chief economist. "So far, both the U.S. Treasury Department and the Federal Reserve have added over $100 billion in liquidity to the mortgage market since September 2008, which put downward pressure on interest rates for fixed-rate mortgages. The Federal Reserve may add up to an additional $570 billion more this year, based on its November 25, 2008 announcement, to further shore up mortgage lending and keep rates low.