Final Stimulus Includes $8,000 Credit and Reinstatement of Loan Limits

• February 17, 2009

by Will Smith

President Obama travels to Denver this morning to sign the stimulus bill that has been almost the sole focus of his administration since taking office four weeks ago. The bill, which passed both the House and Senate on Friday, includes a number of measures to address the troubled housing market. Two measures in particular are notable: the $8,000 homebuyer tax credit, and the reinstatement of increased loan limits for FHA, Fannie Mae, and Freddie Mac.

The final $8,000 tax credit might disappoint those who hoped for the original $15,000 that was introduced two weeks ago but was later reduced. Still, the credit is an improvement over the existing $7,500 credit, which was more like an interest-free loan that had to be paid back over 15 years. The new tax credit never has to be repaid, and effectively amounts to an $8,000 discount on the cost of a new home. A few of the key stipulations are:

• Only first-time homebuyers are eligible. (First-time buyers are defined as people who have not owned a principal residence over the three years prior to purchase.)
• The credit only applies to the purchase of a principal residence (i.e., not a vacation home or investment property).
• The credit is actually the lesser of $8,000 or 10 percent of the purchase price of the home. (This distinction only matters to those who purchase a home worth less than $80,000; everybody else gets the full $8,000.)
• The home must be purchased between January 1, 2009 and December 1, 2009.

The National Association of Realtors (NAR) has published a handy one-page chart explaining the details of the new $8,000 tax credit and comparing it point-by-point to the existing $7,500 credit.

The second measure reinstates the $729,750 loan limit offered by FHA, Fannie, and Freddie. This loan limit is the threshold at which a mortgage crosses from “conforming” to the much more expensive “jumbo”. The increased loan limit is applied in varying amounts on a county-by-county basis depending on the median price of a home in each locality. The idea is that in more expensive markets, the original conforming loan limit threshold of $417,000 was too low and forced homebuyers into onerous jumbo loans even for homes that were not very expensive by local standards.

NAR published another chart that shows the loan limit in every county around the country. In all counties and cities in the DC metro region the loan limit was increased to the full $729,750, a testament to the very high cost of housing in this area.

As for the stimulus bill, there were a handful of other measures directly or indirectly related to housing. NAR has quick explanations of each:

• Neighborhood Stabilization
• Commercial Real Estate
• Rural Housing Service
• Low Income-Housing Grants
• Tax Exempt Housing Bonds
• Energy Efficient Housing Tax Credits & Grants
• Transportation Investments
• Broadband Deployment

26 Comments

1. Pissed said at 1:32 pm on Tuesday February 17, 2009:

   So everyone who purchased a house after April 2008 is screwed by only being elgible for the $7500 that has to be paid back!?

1. Josh said at 2:05 pm on Tuesday February 17, 2009:

   If by “screwed” you mean that you get $500 less in free money taken from your neighbor’s paycheck, then yes.

1. Also Pissed said at 2:18 pm on Tuesday February 17, 2009:

   I agree with Pissed.  Those who bought a home before Jan 1, 2009 are getting the shaft, twice.  $500 less AND you have to repay.

   And Josh, just to clarify, the $7500 credit is a loan, not free money like the new $8000 credit now is.

1. Pissed said at 2:44 pm on Tuesday February 17, 2009:

   I dont mind the repayment if it is needed to help the countries situation in the future and dont expect a free hand out i just think they should have changed the previous “credit” also to no repayment.  Thank you “also pissed”

1. Tom A said at 3:47 pm on Tuesday February 17, 2009:

   I’m worried that because I’m not in foreclosure, or even close to it, I won’t be able to refinance.  Are we only going to refinance the irresponsible people who don’t pay their bills?  I hope not!

1. prospective homebuyer said at 3:53 pm on Tuesday February 17, 2009:

   I have searched the current versions of the stimulus bill online and cannot find reference to increasing the jumbo conforming limits to 2008 levels, except for section 12002 in earlier versions of the bill that is labeled to be stricken.  I know NAR has published this to be the case, but can anyone actually confirm this?

1. AB said at 4:15 pm on Tuesday February 17, 2009:

   I don’t mind taking the $7,500 and paying it back….I think the government is gonna take every single penny back from those $8,000. I find it hard to belive that they will just give that money away like nothing…

1. Pissed said at 5:14 pm on Tuesday February 17, 2009:

   I feel bad for the people who bought a home in Dec. 08…. This web site has alot of info: http://www.federalhousingtaxcredit.com/

1. Will Smith said at 5:50 pm on Tuesday February 17, 2009:

   Pissed, great resource, thanks for posting.

   Also check out our second post on the tax credit posted later today, Does the Original $7,500 Tax Credit Still Have to Be Repaid?

1. prospective homebuyer said at 6:09 pm on Tuesday February 17, 2009:

   Will, can you please cite your source for the increase in jumbo conforming loan limits?  I see the NAR and some small news sources have stated this, but again, I can’t find it in the actual legislation, and my mortgage loan officer could not confirm this either.

1. Will Smith said at 6:36 pm on Tuesday February 17, 2009:

   Prospective Buyer, I believe this is it:
   http://www.house.gov/billtext/hr1_legtext_cr.pdf

   Scroll down to the bottom of page 283. Section 1203 entitled “GSE CONFORMING LOAN LIMITS FOR 2009.”

   Here’s the excerpt that pertains to Fannie and Freddie. (Try to make sense of it at your own peril.)

   “Loan Limit Floors Based on 2008 Levels—For mortgages originated during calendar year 2009, if the limitation on the maximum original principal obligation of a mortgage that may be purchased by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation determined under section 302(b)(2) of the Federal National Mortgage Association Charter Act (12 U.S.C. 1717(b)(2)) or section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1754(a)(2)), respectively, for any size residence for any area is less than such maximum original principal obligation limitation that was in effect for such size residence for such area for 2008 pursuant to section 201 of the Economic Stimulus Act of 2008 (Public Law 110-185; 122 Stat. 619), notwithstanding any other provision of law, the limitation on the maximum original principal obligation of a mortgage for such Association and Corporation for such size residence for such area shall be such maximum limitation in effect for such size residence for such area for 2008.”

   A couple pages above that is the excerpt pertaining to FHA.

   Does that help?

1. prospective homebuyer said at 6:49 pm on Tuesday February 17, 2009:

   Ah, thanks. I’ve been looking here:
   http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.1:
   and the most recent version listed has this provision stricken out.

   Does anyone know when these new limits will be implemented (i.e., how quickly can I take advantage of this and get a conforming loan rate on the $700,000 mortgage I’m trying to get)?  I live in one of the high-cost areas that had the higher limit in place in 2008.

1. charles said at 6:52 pm on Tuesday February 17, 2009:

   question about the 8k refundable tax credit?
   is that per home? ie, will a single first time
   homebuyer be able to claim the entire
   8k?

1. Pissed said at 6:58 pm on Tuesday February 17, 2009:

   Charles go to http://www.federalhousingtaxcredit.com/
   it has alot of info. the amount is based on 10% of what you pay for the home so if you buy a home for $80,000 you would get he full $8000, if you pay less you get less, if you pay more you max out at the $8000

1. Mark Harris said at 11:30 am on Wednesday February 18, 2009:

   so is it official? Those who bought Dec 31st or prior (me personally Sep 2008)have to repay, and those who bought Jan 1st or later get it free? can someone direct me to a gov site that spells this out? and also, how can we organize and fight this obvious unfair ruling?

1. Pissed said at 12:46 pm on Wednesday February 18, 2009:

   Mark, I am getting screwed to! I keep checking the sites hoping something will change but I doubt it. If I find a site I will let you know. http://www.federalhousingtaxcredit.com/ this site has alot of info on it, nothing really that I cared to hear though. :(

1. mj said at 1:19 pm on Wednesday February 18, 2009:

   can people who purchased in 2009 in DC take advantage of the DC and Federal credits?

   Does anyone know how this works or does anyone have a reference?

   Thanks

1. steve eagels said at 2:26 pm on Wednesday February 18, 2009:

   All of us that were first time homebuyers in 2008 must immediately start writing our congressman. This is totally unfair. We helped the economony by buying in 2008, and now are getting scrwed. It should have been retroactive. Lets all ban together and fight this horrible oversight in legislation.

1. Pip said at 4:28 pm on Wednesday February 18, 2009:

   Yes it is unfair, and just plain stupid. I’ve been bombarding my congressmen for the past week with my thoughts on this change. There was nothing wrong with the original credit, except that it didn’t encompass all of 2008 and 2009. So instead of fixing that, they turned it into ‘free money in 2009’ financed by taxpayers. Unbelievable. Completely unbelievable.

   I’m already voting against every single person that voted for this mess come elections… and I’m a Democrat… and I voted for Obama. But this debacle has me disgusted, and I don’t care if I have to vote for a one-eyed chipmunk running for senate… I’m not voting for any of them ever again.

1. Question said at 4:58 pm on Wednesday February 18, 2009:

   Can we hope for change, is it a possibiity?

1. Berny Gonzalez said at 5:16 pm on Wednesday February 18, 2009:

   I apply for the 7500 but still not eh received my return, I am first time home buyer and I would want to know if in this case changed to 8000 with the new approval of the government?

1. Enlightened said at 6:43 pm on Wednesday February 18, 2009:

   The new tax credit change is a benefit that is to help our whole economy not just those selfish cry babies posting here and complaining about being shafted. No one held a gun to your head to buy the house under the old rules!

1. enlightenedisadouchebag said at 9:02 pm on Wednesday February 18, 2009:

   enlightened please go find something better to do with your time…no one cares about your worthless opinion

1. hahaha said at 1:01 am on Thursday February 19, 2009:

   enlightenedisadouchebag- hahaha thanks you just made reading all of this a little better!

1. Pip said at 10:54 am on Thursday February 19, 2009:

   Enlightened needs to become enlightened and realize that nothing in the stimulus plan was very well done. It’s a mass of pork barrel politics the likes of which this country has never seen before. Most of our representatives admit they haven’t even read the whole thing. Our children will be holding the receipt for this spending, years from now, and wonder “what did I buy?”

   That aside, I really hope you’re just being a troll, trying to rile people up. I hate to believe Americans can actually think like you do. Just in case anyone else does, let me point you to another group of crybabies: http://en.wikipedia.org/wiki/Boston_Tea_Party

1. Platinum said at 9:07 am on Monday June 22, 2009:

   I’m upset that the $7,500.00 credit has to be repaid. It was a great benefit when I bought my home in 2008. Now, I have been promoted to a different state and I have to sell my home. Does anyone know if I have to repay it back immediately or if I still have the 15 years ($500 each year)??????