When most markets fail, the government does not do much. The housing market is different. It forms the backbone of modern America. The giant banking bailout is one big sign of its importance, but homebuyers are getting help as well.

The housing market is a bottom up feeder system. Simply put, you buy a home, build some equity in it over time and then sell it. You use your gain to buy a bigger house and so on through life.

Take first time homebuyers out of the system and things get ugly quickly. The homeowners above this level suddenly have nobody to buy their homes. If they cannot sell, they are not buying and the entire market starts to fall apart.

A variety of factors have resulted in a tiny first time homebuyer market segment. This is killing the housing market, so the government has made an effort to get first time buyers back into the market.

The big carrot being dangled is a tax credit created as part of the Housing and Economic Recovery Act of 2008. It is a very big carrot, indeed. How big? Try a $7,500 tax credit for first time homebuyers.

If you hate paying taxes, you should love tax credits. Why? The tax credit is not deducted from your income. It is deducted directly from the amount you are supposed to pay Uncle Sam. Take a minute to think about that.

Assume I can claim this first time buyer tax credit in the amount of $7,500. I determine I owe $2,500 to the IRS after doing my taxes. I would then apply my tax credit to this and send in a return telling the agency to send me $5,000.

It may see dangerous to ask the IRS for more than I actually owe. In general, it is a bad strategy, but not here. This is a fully refundable tax credit, which means it does not matter what I owe. The IRS will be writing checks a lot.

So, is there a catch? Yes and it is very big. This tax credit is a fraud. Why? It must be paid back. Fortunately, you have fifteen years to do it. If you claim the full tax credit, this means paying an additional $500 a year which is not too bad.

The amount of money you make also can be a problem. Couples making more than $150k and non-couples making over $75k face a phase out problem. If you are making this kind of money, however, you probably should already own a home.

Will this tax credit get first time buyers back into the market? Nothing is certain with this wild market, but it certainly cannot hurt? Now if the banks would just get their acts together.