On July 30th President Bush signed the Housing and Economic Recovery Act of 2008 into law Here are the provisions that will affect most people:
1) Effective December 31, FHA loan limits will increase to $271,050
(or 115% of the local median home price) with a cap of $662,500.
The down payment requirement will also increase from 3% to 3.5%.
2) First time homebuyers will receive a $7500 tax “credit” if they buy between April 9, 2008 and June 30, 2009. It’s really an interest-free loan because it must be paid back over the next 15 years.
3) If you’re one of a handful of people who own a home and don’t itemize deductions like mortgage interest and taxes, now you can take a $500 ($1000 married filing joint) deduction.
4) Effective October 1, homebuyers with “problematic” subprime loans can refinance through FHA. If your mortgage qualifies, your existing loan will be written down to 85% of the current appraised value of your home and you’ll get a new FHA 30-year fixed mortgage at 90% of your home’s appraised value. The difference will go to loan costs. When you sell, you’ll have to repay FHA half your appreciation. The loan limit on this program is $550,440.
5) Effective October 1, seller down-payment assistance programs will be prohibited. All other seller assistance programs are still allowed (e.g. state, non-profit)
6) Effective January 1, any property converted from second home or rental property to principal residence will be taxed at capital gains rates during the time it was held as a second home or rental. The principal residence exclusion of $250,000 ($500,000 married filing joint) will be available only for the portion of the gain attributable to the time you lived in the property.
The Act also tightens the licensing requirements for mortgage originators, creating an affordable housing trust fund and providing communities with money to purchase foreclosed properties.
One provision has already proven to be too little too late. The Federal Housing Finance Agency, which was created to oversee government sponsored entities Fannie Mae and Freddie Mac, will now orchestrate their multibillion-dollar taxpayer bailout.
Posted by: Betty Kincaid
