Yes, the tax credit technically is a zero-interest loan that you will repay to the government over 15 years, starting two years after the credit is claimed, at $500 a year.
If you sell the house, you repay the entire amount if there was enough profit to do so. If not, the amount that you don't repay is forgiven.
Why isn't it a gift? You already got a gift this year with the economic-stimulus payment. You think the federal government has a lot of money to spare? Look at the record deficit and tell me Uncle Sam has deep pockets.
Farah Jiminez, executive director of the community development corporation Mount Airy USA, explained it best: If the money didn't have to be repaid or the credit were made a permanent feature of the market, the asking price of houses would be driven up $7,500 by sellers who knew the buyers would be getting it back anyway.
The law is designed to stabilize prices so that values will rise naturally.
I spent a recent afternoon listening to an explanation of the tax credit by some officials from the National Association of Home Builders, and, with some added insight from my cadre of economists and other experts, I offer this:
The $7,500 tax credit is available to first-time buyers (defined as those not having owned a primary residence for three years before the purchase) who close on the sale of a house between April 9, 2008, and July 1, 2009. The house must be the buyer's principal residence.
If you are married and file jointly, the credit is available only if neither you nor your spouse owned a primary residence in the previous three years.
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