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Breaking News: Congress Passes Stimulus Bill — Obama Says He’s Ready To Sign It

February 14th, 2009 categories: Buying, Loans / Financing, Selling, The Economy

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$8,000 First-Time Homebuyer Tax Credit, Higher Loan Limits Included In The Final Bill

The Economic Stimulus Bill, which has consumed much of my attention for the better part of this past week, received Congress’s stamp of approval late last night and is now ready for President Obama’s signature. And according to all reports, he’s eager to sign the bill into law right away.

In terms of real estate, the new law will be a boon to most first-time buyers who purchase this year, as most will qualify for an $8,000 tax credit on their 2009 tax returns.

The old law, which was to expire in July, provided a $7,500 tax credit on homes purchased since last April. However, that law required the entire $7,500 to be repaid, in $500/year annual installments, which essentially made it not a tax credit but simply an interest-free loan.

Under the new law, the now-$8,000 tax credit won’t have to be repaid, making it a true credit for the first time.

There are income limitations (haven’t yet found out whether it’s changed from what it was under the old law, which was a maximum AGI of $150,000 for joint filers and $75,000 for individuals and phased out between $150k-$170k and $75k-$95k for those filing types).

The new credit will apply to all qualified home purchases in 2009; an earlier version of the bill had it expiring in September, but now home buyers have all the way until the end of November. And it now covers home purchases since the beginning of the year (an earlier proposal had it taking effect only after the bill was signed into law).

Here is a description of the tax credit directly from the  Senate’s web site (for the Senate’s entire tax credit summary, Click Here):

Refundable First-time Home Buyer Credit.   Last year, Congress provided taxpayers with a refundable tax credit that was equivalent to an interest-free loan equal to 10 percent of the purchase of a home (up to $7,500) by first-time home buyers.  The provision applies to homes purchased on or after April 9, 2008 and before July 1, 2009.  Taxpayers receiving this tax credit are currently required to repay any amount received under this provision back to the government over 15 years in equal installments, or, if earlier, when the home is sold.  The credit phases out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return).  The bill eliminates the repayment obligation for taxpayers that purchase homes after January 1, 2009, increases the maximum value of the credit to $8,000, and removes the prohibition on financing by mortgage revenue bonds, and extends the availability of the credit for homes purchased before December 1, 2009.  The provision would retain the credit recapture if the house is sold within three years of purchase.  This proposal is estimated to cost $6.638 billion over 10 years.

In addition to the tax credit, the new law also will return the Fannie Mae/Freddie Mac and FHA loan limits to what they were in 2008, when Congress temporarily raised them to help offset the disappearance of reasonably-priced ‘Jumbo’ loans.

In Solano County, Fannie/Freddie (conforming) loans were $557,500 a year ago and are now $417,000. In Contra Costa, they were reduced from $729,750 in ‘08 to $625,500 this year. The FHA limits are $400,200 in Solano and $625,50o in Contra Costa County (same as the conforming limit).

Once the new law takes effect, financing doors that closed on Dec. 31, will reopen for some borrowers needing to finance an amount above the current loan limits.

Last year, there were add-ons that made the jumbo-sized Freddie/ Fannie/FHA loans more expensive than their lower-balance counterparts. The assumption is that that will be the case again. As I hear more details, I’ll keep you posted (so check HomeSection.com often…or subscribe via email to receive these updates automatically).

Finally, the new bill did, I also noted yesterday, includes a provision providing eligible tax payers with a $1,500 tax credit for certain energy upgrades to their homes.

Keep in mind that all of this information is based on various news reports or industry advisories I’ve read. So it’s possible that some not-yet-publicized details may amend what you’ve read here.

So once the bill is signed into law by President Obama and all the nitty-gritty details are made public, I’ll write a new article, outlining the more details about the new law.

Stay tuned…

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This entry was posted on Saturday, February 14th, 2009 at 10:40 am and is filed under Buying, Loans / Financing, Selling, The Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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