The American Recovery and Reinvestment Act (ARRA) established the First-Time Homebuyer Tax Credit, which initially provided a tax credit of 10% of the home's purchase price, up to $7,500, for home purchases made by qualified first-time homebuyers.  The credit was expanded by the Worker, Homeownership, and Business Assistance Act of 2009, which President Obama signed into law in November 6, 2009.

The expanded version of the tax credit increased the maximum credit to $8,000 and removed the repayment requirement altogether, as long as the buyer stayed in the home for at least three years.   The law also created a new $6,500 tax credit for existing homeowners who have lived in their home for at least five consecutive years out of the last eight, and who wish to purchase a different home as their primary residence.  To be eligible for the credit, homebuyers had to close their home purchase by June 1, 2010.  

The credit offered a great opportunity to many low-and moderate-income consumers looking to buy a home.  To provide further assistance, many HFAs stepped in to help buyers that needed down payment and closing cost assistance when purchasing a home with the tax credit, with a number of HFAs offering special short-term second loans to qualified buyers. These loans were available for little or no interest and may be repaid with the homebuyer tax credit refund.