Tag Archives: Housing & Recovery Act

The New Stimulus Plan: What’s in it for me?

Within the new administration’s stimulus plan is an array of programs to help millions of homeowners refinance or modify their mortgages. The program has “teeth,” but requires everyone to make a contribution. Mortgage investors, servicers and borrowers all have to participate. First and foremost, the plan aims to help reduce the wave of unnecessary foreclosures which will in turn provide greater stability to home prices or at least mitigate the downward pressure of home prices, which will help us all.

Who will qualify for which programs?

If your debt to income ratio — that is —your principal, interest, taxes and insurance on your mortgage exceeds 31% of your gross income, you may be able to get help.

If you are borrower in distress, you may be eligible. First of all, you need to know program benefits apply to those in owner-occupied properties. You must live in the home and it must be your first mortgage.

You’ll also need to be patient. Experts predict a big surge to Fannie & Freddie. But they are being encouraged to act swiftly.

Key components of the plan:

1. Homebuyer Tax Credit – The plan provides for an $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment. Most of the mechanics of the credit will be the same as under the 2008 rules: the credit will be claimed on a tax return to reduce the purchaser’s income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.

2. Refinancing – Many homeowners pay their mortgages on time but are not able to refinance to take advantage of today’s lower mortgage rates perhaps due to a decrease in the value of their home. The Refinance program will help borrowers whose loans are held by Fannie Mae or Freddie Mac refinance into a more affordable mortgage. This will offer assistance to as many as 7 to 9 million homeowners.

3. Foreclosure Prevention/Loan Modification – Many homeowners are struggling to make their monthly mortgage payments either because their interest rate has increased or they have less income. The Modification program will provide them with mortgage payments they can afford. It is designed to help people in a distressed situation now or those that have a chance of falling behind in the foreseeable future due to job loss or a reset on their mortgage.

Working with the banking and credit union regulators, the FHA, the VA, the USDA and the Federal Housing Finance Agency, this program will work in tandem with an expanded and improved Hope for Homeowners program. If you or someone you know is worried about losing their home, visit http://www.northropteam.com/hope now. This will assist as many as 3-4 million borrowers.

Important Notes:

*It’s estimated that borrowers will be able to finance up to 105% of the market value. (These loans may be subject to slightly higher interest rates than market.)

Servicers can begin to modify eligible mortgages immediately under the Modification program so that at-risk borrowers can better afford their payments.

Setting a uniform standard to modify these loans will help facilitate the process, and will help these programs go into effect more swiftly. Major Banks and lenders must be on board. Some major banks have already agreed to suspend foreclosure activity until plans go into effect.

Borrowers will need to confirm eligibility through income verification, second liens, credit card bills, recurring debt payments as well as your mortgage payments. So have those documents ready to make sure they can get you into an affordable rate.

Visit http://www.northropteam.com/eligibility for a FAQ and further information on who is eligible.

Again, we are happy to report many homeowners have successfully sold their homes with us over the last four months. We sold more homes in the month of December — typically a slow month, than in any December over years past. We sold more homes in January and February than we have over years past. And we have a record number of settlements scheduled for the month of March.

Any plan that promotes buyers, especially first time home buyers who need the money the most to get started, will have a positive effect on the market; allowing them to invest in their future. The homes that THEY buy will then create new move-up buyers in the market that first needed to get their home sold. To ultimately stimulate and stabilize the economy, housing recovery legislation is the most important first step.


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Housing & Recovery Act: Tax Credit For First-Time Homebuyers

First time homebuyers purchasing a new or pre-existing home may be eligible for a tax credit up to $7,500* for a married couple filing jointly or a single individual, or $3,750* for a married couple filing separately.

To Qualify:

  1. Loan must close on or after April 9,2008 and before July 1, 2009
  2. Property type must be a single family detached home, townhouse or condominium
  3. Income for borrowers must not exceed $75,000 for single tax payers and $150,000 for married couples
  4. Property must be a primary residence
  5. Borrower(s) must not have owned a home during the past 3 years

*amount of the credit will be recaptured over 15 years unless the property ceases to be the homebuyers principal residence, or the property is disposed of at which time repayment of the total credit must be made.

Common Questions & Answers

Q: Who is eligible to claim $7,500 tax credit?
A: First time homebuyers purchasing new or pre existing homes. Must be used as primary residence.

Q: Can the tax credit be claimed if the home is purchased under a mortgage revenue bond (MRB) program?
A: No. The tax credit cannot be combined with the MRB program.

Q: Are there income limits to determine who is eligible to take the tax credit?
A: Yes. Homebuyers who file their taxes as single or head-of-household taxpayers can claim the credit if their modified adjusted gross income (MAGI) is less than $75,000. For married taxpayers filing a joint tax return, the MAGI limit is $150,000. The limit is based on the buyer’s modified adjusted gross income for the year that the house is purchased, except for certain purchases in 2009.

Q: Does the credit amount differ?
A: Yes. The credit is in general equal to $7,500 for a qualified home purchase by a married couple filing jointly or a single homebuyer. A homebuyer who is married but filing separately qualifies for a $3,750 credit. The credit amount is also prorated based on income.

Q: Does the credit have to be paid back to the government? If so, what are the payback provisions?
A: Yes, the tax credit must be repaid. Homebuyers will be required to repay the credit to the government, without interest: over 15 years, when they sell the house if there is sufficient capital gain from the sale, or when they cease to use the house as their primary residence.


Filed under Maryland Real Estate News, Mortgage News