Extension of the Higher Temporary Mortgage Limits has passed.
It is now on the way to President Obama for signature. The net effect will be that the mortgage limits would remain at the same level today through 2010. They could, of course, increase in areas with higher house prices (like Dallas).
And the tax credit proposal (included in the unemployment extension bill) may be finalized next week. Some people believe this is a very positive step. Others feel it won't get buyers 'off the fence'. Details of the new tax credit program are:
- First-time homebuyers will continue at $8,000
- Tax credit for “move up” purchasers will be up to $6,500
- Those buyers must have used their previous home as a principal residence for 5 of the 8 previous years.
- Income limits increased and are the same for first-time and “move up” purchasers: $125,000 for single filers/$225,000 for joint filers
- Limitation on eligible home prices has been increased to $800,000
- Time Frame: December 1, 2009 to April 30, 2010 plus 60 day extension if binding contract is in place by April 30, 2010
- Anti-fraud measures have been added
Below are some of the highlights (as they pertain to homebuyers) of the Emergency Unemployment Compensation Extension Act. It is supposed to be considered by the Senate early next week and will still have to be passed by the House.
Homebuyer credit - Under current law, the First-Time Homebuyer Tax Credit is a refundable tax credit available to an individual buying a principal residence for the first time. The credit phases out for individuals with income between $75,000 and $95,000 and for joint filers with income between $150,000 and $170,000. For purchases made on or after January 1, 2009 and before December 1, 2009, the tax credit is equal to the lesser of $8,000 or 10 percent of the purchase price of the residence. Individuals must repay the credit only if the principal residence is disposed of within 36 months of purchase. For purchases made on or after April 9, 2008 and before January 1, 2009, the tax credit is equal to the lesser of $7,500 or 10 percent of the purchase price of the residence. Individuals purchasing homes in 2008 are also required to repay the credit over 15 years. This proposal would extend the availability of a homebuyer credit to homes under a binding contract before April 30, 2010, allowing 60 days to close.
The other modifications are as follows:
1) The credit is phased out for individuals with income above $125,000 and for joint filers with income about $225,000.
2) An $8,000 credit is available to all first-time homebuyers.
3) A $6,500 credit is available to homebuyers who have been in their current residence for the last five years or more.
4) The credit is available only for the purchase of principal residences with a purchase price of $800,000 or less.
5) The proposal incorporates Senator McCaskill’s proposal in the Service Members Home Ownership Tax Act of 2009 to eliminate the recapture requirement for military personnel, including members of the Foreign Service and intelligence community, forced to sell as a result of an official extended duty of service and to allow military personnel serving outside the United States for at least 90 days in 2009 or 2010 one additional year to qualify for the credit.
6) The proposal includes anti-fraud language.
7) The proposal also includes math error authority for the IRS.
This proposal is estimated to cost $10.8 billion over 10 years.
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