Monday, November 17, 2008

Summary of Real Estate Changes You Should Know About

1. The Tax Credit
Tax credits are special provisions that reduce income tax liability on a dollar for dollar basis. Credits are claimed on an individual's income tax return. In this case, Congress has created a tax credit for first time homebuyers. The maximum credit amount is $7,500. Si if you normally, do not get a refund, you will get an approx $7500 refund! THIS IS AN INCENTIVE AND PART OF THE HOUSING BILL SIGNED BY THE PRESIDENT TO HELP WITH THE HOUSING SLUMP.

Who can use the new tax credit?
Only first time homebuyers are eligible to use the credit.A first time homebuyer is definedas an individual who has not had an ownership interest in a principal residence in the previous three years.

Is there an income restriction?
Yes. Single or head of household are eligible if their income is no more than $75,000. Individuals who file a joint return may have income of no more than $150,000.

Is the amount of the credit ties to the price of the home?
Yes. The credit is for 10% of the cost of the home, up to a maximum credit of $7,500. If a home cost $65,000, the allowable credit would be $6500. If a home cost $120,000, the allowable credit would be $7500. The amount of the credit is the same for all taxpayers, married or single.

2. FHA and Condos:
Among FHA reforms, FHA previously regarded condos as multi-family units, requiring the entire bldg to be FHA approved, but now condos will be treated like a single family home, making buyibg easier.

3. Fannie Mae/Freddie Mac Bailouts:
The National association of Realtors Chief economist, Lawrence Yun, said the move would bring stability & help restore market confidence. It should lower interest rates and encourage lenders to expand mortgage loan operations, both of which should help the housing market.

4. Foreclosure Relief:
An estimated 400,000 struggling homeowners could avoid foreclosure with a new FHA program, Hope for Homeowners. The program began October 1, 2008 and ends September 30th, 2011. With $300 billion in federal funding, FHA will help homeowners with problematic sub prime loans to refinace to an FHA insured, 30 year fixed rate mortgage. One caveat is that lenders must agree to write down the loan to 90% of the appraised value. Eligible mortgages are those originated on or before January 2008, and borrowers must have a debt to income ratio of higher than 31%. For their part, homeowners must agree to share future equity of the home with FHA when the home is sold or refinanced. After 5 years, the equity split is 50%.