The new housing bill

July 31, 9:29 AMReal Estate Marketing ExaminerSpencer Rascoff

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As you might have heard, Congress and the President signed a sweeping housing bill this week which in an attempt to jumpstart the housing market, or at least to stabilize the mess that we're currently in.

Here are the highlights:

• Any first-time home buyers purchasing between April 9, 2008, and July 1, 2009, get up to $7,500 in federal income tax credits.
• Homeowners who don't itemize their taxes can deduct between $500 and $1,000 from their 2008 returns.
• Homeowners having trouble making payments on high-interest mortgages can contact their banks and transform their loans into government-backed, 30-year fixed-rate mortgages.
  • To qualify, homeowners must have a mortgage debt-to-income ratio greater than 31 percent.
    • Multiply your gross monthly salary by 31 percent. A homeowner earning $75,000 a year, for example, must owe a monthly mortgage payments of at least $1,938.
    • The new loan cannot exceed 90 percent of the home's value and borrowers must prove they can repay the loan.
    • This will cost an estimated $300 billion and the government expects about 400,000 homeowners to participate.
• To help neighborhoods with many vacant foreclosed properties, the law includes $3.9 billion in grants for local governments to buy and fix up already-foreclosed property at a discount.
• First-time buyers or homeowners with subprime mortgages in some states can qualify for low-interest loans or refinancing, paid for by $11 billion in tax-free municipal bonds.
• $180 million in preforeclosure financial counseling and legal services for homeowners facing potential foreclosure.

You can learn more here at the HUD website.

Update: I found a good summary from the Wall Street Journal. Here's their take on the key points, and their costs.

Update2: The first-time homebuyer tax credit is actually more like an interest free loan.

"Create home-buyer credit. The bill includes a tax refund for first-time home buyers worth up to 10% of a home's purchase price but no more than $7,500. The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years in equal installments. It would be reduced gradually for single filers with adjusted gross incomes above $75,000 and for joint filers with AGIs over $150,000."