Help for our ailing Sacramento housing market appears to be coming from a number of different areas.  First we have American Recovery and Reinvestment Act of 2009 better known as the stimulus or spending bill.  Then President Obama unveiled his Homeowner Affordability and Stability Plan.  Finally, the new California budget provides a $10,000 state tax credit to people who buy a new house soon.  How does all this work?

Among its many provisions, the American Recovery and Reinvestment Act of 2009, resets the conforming loan limit cap at $729,750, up from $625,500. Numerous counties in California experienced a marked decrease in their conforming loan and FHA limits on Jan. 1 and the stimulus bill reinstates 2008 loan limits through Dec. 31, 2009.  

The bill also increases the first-time home buyer credit from $7,500 to $8,000, and removes the requirement that the credit be paid back if the buyer stays in the home for at least three years. It also extends the expiration date for the credit from July 1 to Dec. 1, 2009. Home buyers must have purchased a home after Jan. 1, 2009, and before Dec. 1, 2009, to be eligible for the $8,000 credit.  Here are the details of this plan:

·         It’s for new and existing homes purchased between Jan. 1 and Dec. 1, 2009.

·         Buyers get a tax break equal to 10% of the purchase price, up to $8,000.

·         It does not have to be repaid. (Last year, buyers got $7,500 tax credits for homes bought between April 9, 2008, and Jan. 1, 2009, but had to repay over 15 years, interest-free).

·         Singles must earn less than $75,000 a year. Married couples can qualify with joint annual incomes up to $150,000.

The Homeowner Affordability and Stability Plan is designed to offer assistance to as many as 9 million homeowners making a good-faith effort to stay current on their mortgage payments, while attempting to prevent foreclosures. There are three components of the plan. The first focuses on homeowners who are current on their mortgage and would be helped by refinancing into a lower interest rate loan; these homeowners must currently be in conforming loans. The second component is designed for homeowners who are currently or are at risk of falling behind on their mortgage obligations and would benefit from a loan modification; the Treasury plan would help offset the cost of the loan modification program. The third component is intended to lower prevailing mortgage interest rates by shoring up confidence in Fannie Mae and Freddie Mac.

The final component of assistance comes from the long overdue California budget which provides a $10,000 state tax credit to people who buy a new house soon.

·         It applies to new California houses or condos bought as primary residences between March 1, 2009, and March 1, 2010.

·         It’s for 5% of the purchase price or $10,000, whichever is lower.

·         The state will take $3,333 off a buyer’s state taxes starting in the year of purchase and for two following years.

·         The owner must live in the new home or condo for two years or lose the break.

·         Collectively, the state tax break is limited to $100 million. At $10,000 per tax break that’s 10,000 new dwellings.

With all this help on the way to the Sacramento real estate market I was surprised to get the following message from one of the lenders we use at MagnumOne Realty:

We are starting to get a number of our lenders sending out e-mails that FHA minimum credit scores are increasing to 620 for loans at $417,000 or less and increasing to between 640 and 660 for jumbo FHA loans above $417,000 to the county limits.

If you have clients you are working with that have scores below 620 get them moving or they may miss the boat on purchases until they can get their scores higher.  Some lenders are not giving us any notice and making the changes immediately others are giving us a few days notice.

Do you suppose we will ever see a dat everyone will be on the same page?