Housing Relief in the Home Bailout Bill

The housing relief bill which will be signed by President Bush sometime next week offers benefits not only to folks that are troubled homeowners but almost everyone that owns a home or is a first time home buyer. The benefits range from a federal tax credit for first time home buyers to permanently raising the conforming loan amount, which benefits higher priced housing markets.

Here are some of the benefits:

First time home buyer tax credit:

If you are a first time home buyer and the residence you are buying is going to be your primary home you are eligible for a federal tax credit of $7,500 or 10 percent of the purchase price, whichever is smaller. The credit is applied to your tax bill, so if you owed $2,000 to the IRS, you would receive a $5,000 refund. The credit is more like a loan because you have to it back in equal amounts each year over the next 15 years.  

To qualify you must have purchased or purchase your home between April 9th, 2008 and July 1st 2009. There are also income restrictions, if your modified adjusted gross income (AGI) is more then $75,000 for single filers or $150,000 for married filers the credit starts to phase out.

Break for Veterans:

Veterans returning from military service are given special treatment if their house is being foreclosed on, lenders have to wait nine months before starting proceedings, the traditional period is 90 days and lenders must wait a year before raising interest rates on loans for veterans returning from duty, these breaks expire on December 31st 2010.

Resizing Jumbo Loans:

Conforming loans, loans under $417,000, that Fannie Mae and Freddie Mac can purchase from banks have lower interest rates then jumbo loans, loans over $417,000. The new permanent conforming loan rate is going to be $625,500 for single family homes, this change will benefit higher priced housing markets. There is a current temporary higher conforming limit of  $729,750 (except in Alaska, Hawaii, Guam and the U.S. Virgin Islands where higher limits may apply) that were passed with the stimulus package earlier this year, that limit expires on December 31st, 2008.

Reverse Mortgage Changes:

Reverse mortgages allow people 62 and over access to the equity in homes without having to pay back the loan until they sell. The largest allowable mortgage will be raised from $400,000 to $625,000. Also, in the past, these mortgages came with high fees and sometimes lenders made qualifying for the mortgage contingent on purchasing some type of financial product, like an insurance policy or annuity.  The new law caps origination fees at 2% of the first $200,000 browwed and 1% beyond $200,000, the total limit for fees is $6,000 and borrowers cannot be forced to purchase a financial products to qualify for the loan.