A Few Things About The Housing Recovery Act

You’re probably tired of hearing about it, but it is an important bill. 

Federal Mortgage Loan Limits: After December 31, 2008, conforming loan limits changed to $417,000 or 115% of the local area median home price, capped at $625,500. FHA loan limits will be the greater of $271,050 or 115% of the local area median home price, capped at $625,500. The downpayment requirement on FHA loans will go up to 3.5%. VA loan limits are raised to the same level as the Economic Stimulus limits through December 31, 2008 ($729,750 here in NoVa). 

Downpayment Assistance: Effective October 1, 2008, FHA has prohibited the use of downpayment assistance programs funded by those who have a financial interest in the sale (e.g. the seller). This will not prohibit other assistance programs provided by nonprofits funded by other sources, churches, employers, or family members. There is some political pressure to restore seller downpayment assistance in some form – that might be on hold for a while now, with the financial markets in disarray. Sellers still can, of course, subsidize buyer closing costs.

Homebuyer Tax Credit: A $7500 tax credit is available for any qualified purchase closing between April 9, 2008 and June 30, 2009. The credit is repayable over 15 years (making it, in effect, an interest free loan). 

Additional Property Tax Deduction: A one-year benefit that will be available to all homeowners. Under current law, property taxes are deductible only if an individual itemizes his/her deductions on Schedule A of their tax return. The new provision will permit a deduction of up to $500 ($1000 on a joint return) for all individuals who utilize the standard deduction. Instructions will be provided on the 2008 tax return when it is distributed at year-end. 

There are many other provisions, mostly of the regulatory type, and I would be happy to answer any questions that don’t require a lawyer or a tax accountant. If you have a second home you were planning to turn into your principal residence for tax purposes, call me for the bad news.


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