Bay Area REBlog

President Obama traveled to Denver this morning to sign the stimulus bill that passed both the House and Senate on Friday.  The new bill includes a number of measures to address the troubled housing market. Two measures in particular are notable: the $8,000 homebuyer tax credit, and the reinstatement of increased loan limits for FHA, Fannie Mae, and Freddie Mac.

 The new $8,000 tax credit is an improvement over the previous $7,500 credit, which was an interest-free loan that had to be paid back over 15 years. The new tax credit never has to be repaid, and effectively amounts to an $8,000 discount on the cost of a new home. A few of the key stipulations are:

·  The home must be purchased between January 1, 2009 and December 1, 2009.

·  Only first-time homebuyers are eligible. (First-time buyers are defined as people who have not owned a principal residence over the three years prior to purchase.)

·  The credit only applies to the purchase of a principal residence (i.e., not a vacation home or investment property).

·  The credit is actually the lesser of $8,000 or 10 percent of the purchase price of the home. (This really only matters to those who purchase a home worth less than $80,000; everybody else gets the full $8,000.)

The second measure reinstates the $729,750 loan limit offered by FHA, Fannie, and Freddie (back to the 2008 limits). This loan limit is the threshold at which a mortgage crosses from “Conforming” to the much more expensive “Jumbo” category. The increased loan limit is applied in varying amounts on a county-by-county basis depending on the median price of a home in each region.  Basically, in more expensive markets, the original conforming loan limit threshold of $417,000 was too low and forced homebuyers into more expensive jumbo loans even for homes that were not very expensive by local standards.  This new loan limit will definitely help homeowners to either purchase or refinance into a much more competitive mortgage.

Click on this link to see the handy chart NAR have published outlining all changes.

Thanks to George Metrik of Bay Area Home Loans for this updated information.

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