Remember School House Rock? How a bill becomes a law? In 5th grade, I played “Bill” in a 1-act play staged in our school cafeteria. But I never thought my star appearance would come in handy until this week when some huge housing changes were signed into law. I wrote about this last week, but the final word, freshly inked by President Bush, is officially in effect! So details are in order.
With about 700 pages in this bill, it covers a lot of ground but here are some main points homeowners, home buyers and anyone interested in mortgages or real estate will want to know. Keep in mind I’m really only going to focus on the key home/money issues of the new legislation since, well, that’s what Quizzle is all about.
Most of these changes go into effect October 1, 2008, unless otherwise noted:
- 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 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 wishing 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.
- 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 cash-out refinancing remains at 95% - No change here.
- 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. You’ll need to speak to a mortgage expert for your county’s new loan limit.
- Tax Breaks for First Time Homebuyers – Perhaps the most positive aspect of 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.
- Reverses Mortgages – Loan limits will by synched up with the Fannie Mae and Freddie Mac limit of $417,000.
As we learn more information about the Housing and Economic Recovery Act of 2008, I’ll be sure to keep it updated. This is a huge move for the housing market, hopefully one that will have the positive impact we’re all hoping for.
As always, if you need professional home financing advice, let us know and we can match you with a personal Mortgage Banker if you don’t already have one. If you’ve got questions about Quizzle or want to see a post about something in particular, drop me a line - blog@quizzle.com.
September 23rd, 2008 at 4:01 pm
Great information on FHA and the new guidelines.