Just found this Video online and thought it the perfect simple explanation -

I have several first time home buyers at the moment and we have all been talking about the new First-Time Home buyer Credit.  This is the new 2009 First-Time Home buyer Credit.  The $8,000. tax credit that is a credit and NOT a loan.  This credit DOES NOT have to be paid back and as everything there are exceptions.  The exceptions are...  

• Must use the home as a principle residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply. Ask your tax adviser or read Form 5405
  

So back to the "Who is Eligible?".  You can claim the tax credit if you are a first-time home buyer.  Have you ever purchased a home?  If the answer is YES you STILL MIGHT BE ELIGIBLE.   The first-time home buyer must be able to state you did not own any other home during the past 3 year period that would end on the date of your new purchase.  So see you may be a first-time home buyer even if you have owned a home.  It is home-buying "do-overs"!

1. You must have purchased your home after January 1, 2009 and before December 1, 2009 to claim the tax credit.
2. Sometimes it is easier to decide eligibility if you know who CANNOT claim the credit
3. Your modified adjusted gross income is over $95,000 or $170,000 if married filing a joint return.
4. You are a nonresident alien.
5. You acquired your home by gift or you inherited it.
6. You purchased your home from a person you are related to.

There are other exceptions but for your local Kitsap area they don't mean much.  You can find them on Form 5405.

Of course you will want to verify all of this with a tax consultant or go to the IRS web site and look for IRS Form 5405.

I have some ideas about this credit for local buyers so if you are interested please send me an email for more discussion!