http://online.wsj.com/article/SB123508484933027389.html
FEBRUARY 19, 2009, 6:28 P.M. ET
The Housing Bailout: Do You Qualify? $8,000 home-buying credit? Refi assistance? How to know whether the Obama administration's initiatives will help you.By BRETT ARENDS
It's been a busy week in the housing market "stabilization" business. If you're finding it hard to keep up, it's no surprise. The latest proposals have only been sketched out in broad strokes: More details are coming on March 4.
But here are broad points that you should know about:
1. To find out whether you qualify for the bailout, check your financial statements and do the math. Under the current proposal, you'll only qualify if your monthly payments are at least 38% of your income. Some people may have an incentive to quit their jobs, or at least dump their second job, to hit this threshold, because this bailout can be valuable.
Taxpayers and your mortgage lender will share the costs of lowering your payments to 31% of your income. That may mean interest rates as low as 2%. Or you may get the principal reduced. And if you pay your mortgage on time, the taxpayers will pay off as much as $1,000 of your loan each year for five years. For someone on $50,000 a year, this could be worth $4,500 a year, tax free. Those whose mortgage payments are less than 38% of their income get no help.
2. If you are a responsible homeowner but are locked out of the refi market because the housing collapse wiped out your equity, you may benefit from the new refi assistance. The government will help you refinance your mortgage if you owe between 80% and 105% of your home's value. Zillow, the real estate information company, estimates that 14.8 million homeowners may qualify. The problems? Only those with mortgages owned by Fannie Mae or Freddie Mac get cut in. And the proposal excludes many homeowners in the worst-hit areas, like Florida, Nevada, Arizona and California, where homes prices have plummeted far below the level of many mortgages. Nationally, Zillow estimates 14.1 million homes are actually worth too little, in relation to their mortgages, to qualify.
3. Anyone who hopes to qualify for either program should start gathering their paperwork now. You'll need proof of current income and assets, and those seeking refinancing help should get a handle on their home's current value. But Josh Denney of the Mortgage Bankers' Association says you should wait until March 4 before contacting your mortgage lender or servicer. That's when more details on the plan are due.
4. Many renters have been kicked out of their homes because deadbeat landlords walked away from their loans, leaving the banks to foreclose. If you're in that boat, good news: The administration is about to offer $1.5 billion in relocation and other forms of assistance. Yet again, more details will be revealed in March.
5. Middle class taxpayers should take a look at one $8,000 freebie. Anyone who hasn't owned a home for at least three years is entitled to a helpful tax credit, for up to 10% of the cost, up to $8,000, if they buy a home this year. That won't go far in NYC, but it will in the cheaper parts of the country. (Oklahoma ho!) You might also take a look at burst bubble territories, from Florida to Arizona. There's a lot of very cheap property around. It's a refundable credit – so if you don't pay $8,000 in taxes, or indeed any taxes at all, you get the rest as a check. Those with higher incomes are out of luck – the credit phases out above a modified adjusted gross income of $75,000, or twice that if you file jointly.
6. Living in an expensive home in San Francisco or New York and missing out on the refi boom? Good news. The government just raised the "conforming loan" limits to $729,750 from $625,500, so those with more expensive properties can get in. Good deal. There are 30-year conforming loans out there for about 5% or so.
7. This is a good time to get some double glazing, insulation, and other energy-efficient home improvements. The stimulus package gives a tax credit of up to $1,500, covering 30% of the costs.
8. And if grandma is looking for a reverse mortgage, the limits for reverse mortgages backed by the Federal Housing Administration have been raised to $625,000 from $417,000. The financial crisis has left the FHA as the main player in the market of reverse mortgages, which allow older homeowners to tap the equity in their home for living expenses.
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Makes you wanna spit out jellybeans, huh?
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