Tax Credit, Stimulus Plan, etc

The American Recovery and Reinvestment Act of 2009 ("Stimulus Bill") includes a provision providing a tax credit for first time home buyers. First-time homebuyers who purchase homes from January to the end of November 2009 may be eligible for the tax credit up to $8,000. A tax credit is much better than a tax deduction because it basically is the cash in hand, either in the form of a refund or reducing the amount owed in taxes. A tax deduction only reduces ones taxable income. The tax credit is available for couples with incomes less than $150,000 and single filers with incomes less than $75,000. Buyers will have to repay the credit if they sell their homes within three years.

There are also provisions for extending tax credits for making homes more energy efficient (through purchase of new appliances, air conditioning systems, water heaters, windows, insulation, etc. ) as well as provisions to help communities purchase and rehabilitate foreclosed homes.

President Obama has also outlined a plan to help some homeowners whose mortgages are in default or risk of default, though this plan has not passed through congress.

Additonally, Fannie Mae will now purchase loans for borrowers with up to 10 properties financed. This means investors will be able to more readily find conforming loans. The restrictions are strict: the borrower must have 30% down payment, a high credit score, and plenty of money for reserves on the existing mortgage payments. Hopefully, this will help stimulate some investors to start purchasing more properties. Previously, investors could only finance up to 4 properties with conforming loans. If they wanted to purchase more than 4 properties, they would have to pay with cash or get a nonconforming loan which are harder to qualify for and likely have less than ideal terms.

None of these provisions or tax credits will help everyone but hopefully they will all help in some way to move the economy in a positive direction!