This landmark legislation, which passed with widespread bipartisan support, contains several provisions to help home buyers, stop the slide in home prices, provide a lifeline to borrowers facing foreclosure, improve mortgage liquidity and bolster confidence in Fannie Mae and Freddie Mac. The centerpiece of the new law – and the element that NAHB fought hardest for – is a temporary tax credit of $7,500 for first-time home buyers (see story below for details). NAHB was successful in urging Congress to extend the expiration date on this tax credit by three months to include the spring and early summer home buying season of 2009. Other important provisions of the legislation include reform of the regulatory framework for the housing GSEs and explicit federal backing of Fannie Mae and Freddie Mac; FHA modernization and expansion of FHA programs to help struggling borrowers; permanent increases in the loan limits for GSE-purchased and FHA-insured mortgages; an expansion of the mortgage revenue bond program; and significant enhancements to the Low Income Housing Tax Credit program.

Of course, the bill did not come without some trade-offs – in particular, an increase in the FHA's down payment requirement from 3% to 3.5% and the ending of seller-assisted down payment programs as of Oct. 1. These two concerning aspects of the legislation were unavoidable given the current political climate. Even so, the first-time buyer tax credit should help to reduce inventories and get the supply-demand equation back into greater balance (keep in mind, 40% of all home purchases are made by first-timers).

The day that the bill, known as the Housing and Economic Recovery Act of 2008, was passed by the Senate, NAHB produced and distributed a Special Edition of Nation's Building News Online heralding the event.  More information on the individual provisions of the new law is available in that publication and the latest NBN that was published on July 29.  A special NAHB media teleconference is also in the works, along with significant additional outreach to expand awareness of the tax credit among potential home buyers. Contacts: (tax credit) Rob Dietz, x8285; (other provisions) Dave Ledford, x8265.

Q: What are the income limits? 

A: To receive the full credit, a single taxpayer must earn less than $75,000 per year and married couples who file jointly must earn less than $150,000 per year.  A partial credit is available to those earning up to $95,000 for a single or $170,000 for a married couple.

Q: What types of homes will qualify for the tax credit?

A: Any home purchased by an eligible first-time home buyer will qualify for the credit, provided that the home will be used as a principal residence and the buyer has not owned a home in the previous three years. This includes single-family detached homes, attached homes like townhouses, and condominiums.

Q: What does it mean that the tax credit is refundable?

 A: It means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. For example, if you owed the IRS $5,000 in taxes and qualified for the entire $7,500 credit, the credit would eliminate that debt and the government would cut you a check for the remaining $2,500.

Q: Do you have to pay back the credit?

A: Yes, the tax credit must be repaid. Home buyers will be required to repay the credit to the government, without interest, over 15 years or when they sell the house, if there is sufficient capital gain from the sale. For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. The home owner does not have to begin making repayments on the credit until two years after the credit is claimed.

For more information, go to http://www.federalhousingtaxcredit.com/ or contact Rob Dietz, x8285. [return to top]