Housing and Economic Recovery Act of 2008

We've been discussing all of these bills and plans for weeks and weeks, and now it's official… President Bush has signed the Housing and Economic Recovery Act of 2008 into law. With about 700 pages in this bill, it covers a lot of ground, and most of the new laws go into effect October 1st.

Some of the main points that anyone buying a home or interested in a mortgage will want to know, include:

• New Loan Limits for FHA - After December 31, 2008, FHA loan limits will be 115% of the median home sales price. In no case will the limit be less than $271,050 or greater than $625,500. Until December 31, many counties enjoy loan limits as high as $729,750 or 125% of the median home price.
• FHA Down Payment Assistance eliminated – Home buyers have only until October 1, 2008 to qualify and receive down payment assistance with FHA loans.
• FHA cash-out refinancing remains at 95% - No change here.
• FHA refinancing will only allow up to 96.5% for rate and term mortgage refinances - Currently it’s at 97%. What this means is you'll only be able to qualify for a loan amount up to 96.5% of your homes appraised value. So if your home is appraised at $100,000, you'll qualify for a $96,500 mortgage.
• FHA minimum down payments will now be 3.5% - Again, home buyers have until October 1 to take advantage of the current 3% minimum down payment. To illustrate this, a person wanting to buy a $200,000 home will now have to come up with an additional $1,000 for the down payment. Add to this the fact that down payment assistance is being eliminated and the urgency to act now on FHA loans can’t be overstated.
• Tax Breaks for First Time Homebuyers – Perhaps the most positive aspect of the Housing and Economic Recovery Act of 2008. There will be a tax credit of $7,500 (or up to 10% of the sales price, whichever is less) for first-time home buyers (or people who have not owned a home for three years). This credit phases out as annual income levels top $75k for an individual or $150k for a joint return. Key things: Must be a primary residence, the tax credit is PAID BACK in $500 increments over a 15 year period as part of your taxes (not cash payments) and is retroactive for homes sold between April 9, 2008 and July 1, 2009.
• Conventional loan limits (through Fannie Mae and Freddie Mac) will be calculated by county – The conventional loan limit is the most you can borrow before your mortgage is considered a “jumbo” loan and therefore subject to higher interest rates. The new loan limit will be 115% of the median sales price. In no case will the limit be less than $417,000 or greater than $625,500.
• Reverse Mortgages – Loan limits will by synched up with the Fannie Mae and Freddie Mac limit of $417,000.

If you have specific questions about this new Housing and Economic Recovery Act of 2008, post your question using the comment link below and we'll try to get the answer for you. Remember, your email address will never be published at this site to protect your privacy.