Housing Bill: What It Means for Buyers
by Hassan Nicholás
As you may or may not know a Housing bill, the Housing and Economic Recovery Act of 2008, was signed into law about a month ago, on July 30th. We’ve received some questions about it from some of our “viewers” so we’d figure we would put together a summary of what this new bill means for first-time home buyers. Incentive for this legislation came out of the need for more foreclosure prevention measures.
The tax credit feature of the loan is the only segment of the bill specifically aimed at first-time home buyers.
- Under bill, first-time home buyers (defined as not having owned a home in the last three years) will be eligible for a tax credit of 10% of the purchase price up to a maximum of $7,500.
- Income limitations. Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 would qualify for the full $7,500 tax credit. The tax credit phases out for higher incomes.
- You are only eligible if you bought after April 8th of this year and before July 1, 2009
- It’s only a one-time tax credit
- The money is repaid after over 15 years, in which you make $500 payments per year starting the two years after you buy the house
- If you take the full $7,500 credit your income tax bill will increase by $500 a year for 15 years.
- If you sell the house before then you pay Uncle Sam the remaining balance
Essentially, the government is giving you an interest free loan to be added to your disposable income.
Property tax deductions were modified for all homeowners.
- Single filers who pay property taxes increase their standard deduction by $500, $1,000 for couples filing jointly.
- You can’t increase the standard deduction by more than the property tax bill. Example: You’re married and filing jointly you get an $800 deduction if you pay $800 in property taxes, not a $1,000 deduction.
As current law has it, you can deduct property taxes from federal income tax only if you itemize deductions on Schedule A. The new twist will benefit those, like retirees, who own their houses outright and therefore don’t pay any mortgage interest or people who just don’t have enough deductions to itemize on Schedule A.
FHA Program Updated
- FHA loan limit increased from 95% to 110% of the median home price in the area
- The cap set at 150% of the GSE limit, currently $625,000
- Home buyers required to put minimum 3.5% down
Seller-Paid down payment assistance,prohibited.
Additional
- The new bill will require licensing and registration of all mortgage brokers.
- Mortgage lenders are now required to present home buyers and owners looking to refinance with disclosures within three (3) days of applying for some loans. Disclosures must also be required no later than seven (7) days before closing, allowing borrower to loan shop for more favorable terms. Lenders will also be required to inform borrowers of the maximum mortgage payment possible under the loan (Wow, think how that alone could have saved many homes.)
So there you have it. Remember that there is more to the Bill, as it applies to distressed homeowners primarily. As far as how it could affect potential home buyers I hope that I outlined the main points. I would also advise you do more research.
