Here is a thurough explanation of the recent legislation signed by President Obama. It has been provided by Brian Bonnet, a mortgage broker with Signature Mortgage which is an affiliate of McEnearney Associates, Inc.
"In general the "American Recovery Act" affects us from a real estate perspective in a couple of ways. The Fannie/Freddie and FHA loan limits will be back to 729,750. It will take several weeks for the industry to implement the changes, but you can count on the changes. VA is currently at 812,500 with no money down. FHA will be up to 729,350 with 3.5% down. There are and will be very good financing opportunities for most buyers.
The much talked about tax credit for home buyers is exactly that. It will be available to those eligible when they file their 2009 or 2010 tax returns. If a taxpayer owes $8000 in Federal taxes and they are eligible for the full tax credit, their Federal tax liability would drop to zero. It is available irrespective of whether you have previously owned a home and will not have to be repaid unless you sell the property you purchase within a certain time frame. The income limit for the full credit is $75,000 for an individual and $150,000 for a married couple filing together.
Above those income levels the credit is phased out and disappears entirely at $95,000 for the individual and $170,000 for the couple.The Act extends the Military Homeowner Assistance Program (HAP) beyond BRAC locations. HAP is a DOD program, and DOD will establish policy guidance on applicant processing and benefits. Until that time, potential applicants may submit applications to appropriate HAP districts; however, no action will be taken on the applications until any change to the HAP authority has been enacted and DOD guidance is received. Those words were from a DoD website. The bottom line is that personnel who are transferred out of our area and who had purchased a home locally after a certain date in 2006 and sell that home before a certain date in 2012 may be eligible for some relief from DoD for a loss in value which they may have experienced. Stay tuned for the details.
Outside of the legislative front, there are a couple of other reminders. Risk based pricing is becoming more pronounced and we expect new announcements out of Fannie and Freddie in the next 30 days. A current example involves condo purchases with conventional financing. LTV's over 75% require a mortgage price adjustment of .75 discount points. In other words someone putting down 20% on a condo might receive a 4.875% interest rate with .75 points whereas someone purchasing a non-condo property with 20% down might receive a 4.875% rate with no points. Other examples of risk based pricing involve credit scores. If a borrower's credit scores dip below 740 they may be hit with price adjustments even if they are putting down 20%. As credit scores go down, the adjustments become larger - as much as 3.5 points even with 20% down. Remember investors are again allowed to obtain Fannie and Freddie loans for as many as 10 properties. All investment property loans now require 25% down for single properties and 30% down for 2-4 unit properties. The liquid asset reserve requirements have increased, but there are great opportunities for investors.
If you are planning on turning your existing home into a rental and purchasing a new home, you will have to have at least 30% equity (25% for FHA) in the home which is to become a rental as evidenced by an appraisal. You will also need 6 months PITI on both the new rental and the new residence after settlement.
Clarification: The Federal tax credit of up to $8000 is not technically for first time homebuyers only, but in order to be eligible, one may not have owned a home within 3 years of the date of purchase of the property for which the credit will be sought."Please contact us if you have any questions! Call 703-549-9292 and ask for Sue Goodhart's office or e-mail at sue@suegoodhart.com
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