Housing Bill Has Something for Almost Everyone

Don't ignore the housing bailout bill because you think it benefits only troubled homeowners. You may be surprised to learn that you may miss out on a windfall. The bill does offer incentives to certain over-extended borrowers and their mortgage lenders.

But it also offer many hand-outs to millions of people who have the potential to benefit in other ways.

Here are some of the new benefits:

• Renegotiating Mortgages: Some people may be allowed to cancel their old ARMs and replace them with new fixed-rate loans lasting at least 30 years. The program officially begins on Oct. 1, 2008, but some lenders may be willing to start their negotiations with borrowers sooner. It expires on September 30, 2011.
  
• Break for First-time Buyers: If you're buying a primary residence and you're a first-time homebuyer, you're eligible for a federal tax credit of up to $7,500 or 10% of the purchase price (whichever is smaller). With this credit, you subtract the tax credit from the total amount you would pay to the IRS. So if you owe $1,500 to the IRS, and you qualify for the credit, you would end up getting a $6,000 credit. This changes and phases out completedly depending upon income.


• A Break for Vets: Lenders will have to wait nine month -- not 90 days -- before beginning foreclosure procedures on someone returning from the military. They must wait a year before raising interest rates on a mortgage held by someone returning from military service.


• Additional Deduction: Homeowners may now take an additional federal tax deduction of $500 or $1,000 if you're married and filing your tax returns jointly. The catch here is that you must report the property taxes on your tax form. If they are less than $500 or $1,000 (depending upon if you're single or married and filing jointly), your deduction will be limited to the amount of the property tax you paid.


• Reverse Mortgage Changes: Origination fees are limited to 2% of any loan up to $200,000 and 1% over that, up to a maximum of $6,000. Borrowers cannot be forced to purchase an annuity or other financial/insurance product as a qualification condition. The bill raises the maximum amount available for borrowing from $400,000 to a cap of $625,000.


• Redefinition of Jumbo Loans: Any loan over 115% of the local median home price and larger than $625,500.

credit: Ron Lieber 7/25/08