American Recovery & Reinvestment Act of 2009

In February of this year, the U.S. House of Representatives and the Senate passed the American Recovery & Reinvestment Act of 2009 which President Obama signed into law four days later, a $780 billion dollar package with 35% devoted to tax cuts, the rest to spending slated for ’09 and ’10. While this was mentioned briefly in an earlier Light Amber blog post, “Maple Sweet Blog is Born”, here is further clarification.

Two elements of the stimulus package important to the real estate market at the Home Buyer Tax Credit & FHA, Fannie Mae & Freddie Mac Loan Limit provisions.

The Home Buyer Tax Credit, after a major campaign to allow qualification for all buyers and to increase the credit cap to $15,000, has been increased to from up to $7,500 to up to $8,.000 for just first time home buyers and is phased out for individuals with income over $75k and couples over $150k. The new terms are effective from January 1, 2009 through December 1 of 2009 and apply to any single family principal residence including condos, co-ops and townhouses.

Favorably, and unlike the 2008 Home Byer Tax Credit, the 2009 credit does not require repayment in 2009 but would be recaptured if the residence is sold within three years of purchase.

Earlier this month Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development (HUD), said the Federal Housing Administration (FHA) will permit its lenders to allow homeowners to use the $8,000 tax credit at closing, a critical improvement for first time home buyer FHA consumers as it effectively “monetizes” the tax credit through short term bridge loans and gives the borrowers access to the funds up front at the closing table towards down payment & or closing costs.

For more detailed information on this tax credit, see this National Association of Home Builders FAQ.

Loan limits for FHA, Fannie Mae & Freddie Mac are reinstated from 2008, equal to the greater of 125% of the 2008 local median home price or $271,050 for FHA and $417,000 for Fannie & Freddie, with an overall maximum cap of $729,750. These limits expire New Year’s Eve of 2009.

To confirm any of these details before planning a purchase based on this information, check with your accountant & or attorney. For a list of Vermont licensed accountants or land use attorneys, e-mail info(at)maplesweet(dotted)com