The Housing and Economic Recovery Act of 2008 contains important  provisions and far reaching implications for home owners.

Conventional Loan Programs

Home Owners AND Home Buyers

Starting January 1, 2009, the new conforming loan limit in high cost areas will be $625,500 vs. the current limit of $729,750.

Clients: Refinance or Buy today! Those who have or will need a loan amount greater than $625,500 after January 1, 2009 could be in for a interest rate shock north of 10%.  Jumbo (> $729,750) 30-year fixed loans are at 9% today. Waiting could cost you about $450 per month more per $100,000 of loan amount compared to what you can refinance or buy into today (about 6.5%).

Home Buyers

First-time home buyers, who have not owned a home within 3 years, can receive a  tax credit of the purchase price not to exceed $7,500.

Buyers: Take advantage of the credit for new homes bought between  April 9, 2008 and July 1, 2009. If you bought a home after April 9, 2008, make sure you speak with a tax professional to take advantage of the credit.

New Federal Housing Administration (FHA) Programs

Home Owners

FHA foreclosure rescue: A refinance program for homebuyers with problematic subprime loans. Lenders would write down qualified mortgages to 85% of the current appraised value and qualified borrowers would get a new FHA 30-year fixed mortgage at 90% of appraised value. Borrowers would have to share up to 50% of all future appreciation with FHA. The loan limit for this program is $550,440 nationwide. Program is effective on October 1, 2008.

Owners: Call a mortgage professional today to find out if you qualify. Be prepared to take advantage of the program when it goes into effect.

Home Buyers

Minimum down payment increased from 3% to 3.5% after December 31, 2008.

Down payment assistance programs funded by those who have a financial interest in the sale will be prohibited, e.g., Nehemiah Program via seller credits. However, assistance provided by nonprofits, churches, employers, or family members are allowed. This prohibition goes into effect September 30th, 2008.

Buyers: If you won’t have a down payment of more than 3.5% after December 31, 2008, then prepare to buy a home before the new change goes into effect.

3% Down – 585 FICO
6.5% Interest Rate - Up to $729,000

Hot off the Press from my friend Kamila Harkavy at Pacific Mortgage Consultants

How’s that sound for a California home buyer? The $729K is the new conforming loan rate and will depend on the county. This is a better rate than people with 800 FICO’s were getting 7 months ago on conforming loans under $417K

That's a 30 year fixed loan for FHA!!!  For someone with a 585 FICO and only a 3% down payment, this is an incredible opportunity to take advantage of in this buyers' market.  These rates are in effect only through 2008 so people should not wait too long.

This same FHA loan is available for cash-out refis too.  People don't have to have any cash reserves in the bank and there's NO pre-payment penalty!!!

This same loan would have come with an interest rate much higher than this in the recent past.

Please note - this loan requires the borrower to fully document their income.

Many people with good credit will be taking advantage of this loan for refis and for purchases due to the high loan-value ratio which is very hard to find in today's mortgage market.  Few lenders will loan to that high a ratio and certainly not at a blended rate of a first and second mortgage of 6.5%!!.

Buyers may be able to find highly motivated sellers who will cover some or all of their closing costs at which point, all they need is a 3% down payment and qualifying income to become a homeowner!