Economic Stimulus Act Details
The signing of the American Recovery and Reinvestment Act, better known as the stimulus package, contains several positive provisions to energize the housing market.
From increasing tax credits for first-time homebuyers to reinstating higher loan limits for buyers in high-cost areas, the stimulus is expected to play a significant role in the housing recovery.
Below are some of the program’s highlights:
- Loan limits up to $729,7500 have been reinstated for high-cost areas. This allows borrowers to avoid higher cost “jumbo” loan and instead get a conforming loan for homes priced up to $729,750.
- First-time homebuyer tax credit will be raised to $8,000 with NO payback (a true credit) for homes purchased between January 1, 2009 and December 1, 2009 (2008 purchases are not eligible). Homebuyers mustlive in the home for 3 years without selling in order to be eligible. Use of this credit reduces the purchaser’s income tax liability. If, for example, the homebuyer owed $10,000 in taxes, your tax bill would be only $2,000 after using the credit. If any credit amount remains unused, then the unused portion will be refunded as a check to the purchaser.
- $75 billion has been earmarked by the U.S. government for foreclosure mitigation (details to be released). With fewer foreclosures on the market, the expectation is for real estate market prices to stabilizeand possibly begin slowly appreciating again.
- Mortgage rates are expected to continue falling based on the buying of another $200-300 billion of mortgage paper from the GSEs, thereby freeing the agencies to purchase additional mortgages. Falling mortgage rates, as the result of improving liquidity and credit in the mortgage market, will lower monthly mortgage payments for buyers.
- Fannie Mae has raised its total of investment properties eligible for loans from 4 to 10. The new higher limit means investors can now obtain financing on up to 10 properties. Before the higher limit, investors had to use all of their own cash for purchases of more than four properties.
- FHA insured reverse mortgage loan limits were raised to $625,500 across the country. The previous limit was $417,000.
- Mortgage interest deductibility, real estate tax deductibility, and the $250,000/$500,000 cap on tax-free gains were all preserved. The preservation of these important tax breaks continue to underscore that buying or selling a home remains a great tax shelter for individuals and families.
Information provided by Diana Molenaar, Prospect Mortgage.
March 11th, 2009 Posted in Buyer Stuff
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No Responses to “Economic Stimulus Act Details”
By Brewer Caldwell on Mar 13, 2009
I agree there are some benefits to the stimulus package but over the entire stimulus package I feel is too little too late. It will help some but not near enough to really make a difference. This means there will be more blood in the streets and we can either sit on the sidelines watching it happen. Or get involved and try to snatch up some great deals in the mean time. I really like what he said recently when he revised one of his own quotes “Buy when there is blood in the streets, even if it is your own.” My past investments have been far from sheltered in this recent market but it doesn’t stop me getting out there and finding those great deals for me and my clients.