What it means to homebuyers

The Housing and Economic Recovery Act of 2008 will introduce changes in the mortgage industry which will also affect the housing market.  Here is a brief summary of the new legislation and what it means to homebuyers.

Purpose of the legislation:

  • Make it easier to buy or sell a home
  • Slow down the rate of foreclosures
  • Ensure the financial stability of Fannie Mae and Freddie Mac


  • Higher permanent loan limits for conventional, FHA and VA Loans (effective January 1, 2009)
  • Tax credit for first-time homebuyers – up to $7,500 in the purchase year, for homes purchased between April 9, 2008 and July 1, 2009.
  • Modernization of FHA loan programs – including a 3.5% minimum down payment (effective January 1, 2009)
  • Fannie Mae and Freddie Mac get a financial boost from the U.S. Treasury, and they will have a new regulator with broader authority
  • FHA “HOPE” Rescue Plan – refinancing for homeowners at risk of foreclosure

What this means to homebuyers:

The higher loan limits could help buyers obtain more affordable financing; however, the effects will vary by geographical location – so ask your Mortgage Adviser for details.  Since the new permanent limits are less aggressive than the “conforming plus” limits that expire on December 31, 2008, buyers must act soon to take advantage of current higher limits.

The initial cash savings from the tax credit may be very attractive to many first-time homebuyers; however, buyers must act soon to take advantage of the tax credit by closing on a new home before July 1, 2009.

Help for Fannie Mae and Freddie Mac makes it easier to buy or sell a home by boosting investor and consumer confidence in the housing market.  The FHA “HOPE” Rescue Program may help some homeowners avoid foreclosure, potentially reducing the inventory of homes entering the market.  This is good news for everyone.