Spencer Rascoff is COO of Zillow.com, one of the leading real estate sites. He’s a real estate junkie who goes to open houses for fun. Follow him on Twitter.
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.
Key points of the housing bill, and their cost over 10 years (to be fully offset by tax code changes and fees):
• Fund to provide more low-income housing: $5.3 billion
• Tax credits for first-time home buyers: $4.6 billion
• Grants for state and local governments to buy foreclosed homes: $3.9 billion
• FHA insurance for up to $300 billion of home loans: $729 million
• Counseling for homeowners facing foreclosure: $210 million
• Loosens restrictions on how states issue tax-exempt housing bonds
• Keeps lenders from foreclosing or increasing mortgage interest on returning troops for a year. Creates financial-counseling program, increases home-loan limit for military veterans: $112 million
• Raises loan limit for lenders to 115% of the local area median home price, up to $625,000
• Raises limit on seniors' reverse-mortgage program to $625,000
• Raises limit on federal debt to $10.6 trillion, from $9.8 trillion
• New regulator for Fannie and Freddie, financed by the two lenders
The bill also authorizes the Treasury secretary to expand credit and buy equity shares in Fannie or Freddie if necessary. The Congressional Budget Office estimates this would cost an extra $25 billion if it happened.
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."
Author: Spencer Rascoff
Spencer Rascoff is a National Examiner. You can see Spencer's articles on Spencer's Home Page.
Spencer Rascoff is COO of Zillow.com, one of the leading real estate sites. He’s a real estate junkie who goes to open houses for fun. Follow him on Twitter.
1 comment
RSS
Email
Print
