New Housing Bill: The Good, The Bad and The Ugly

Last week, after much rancor in the Congress, President Bush signed the much-anticipated housing bill.. While the full impact of the bill is yet to be determined, some points are quite clear. This bill has definite winner and losers. And, sometimes the winners are also losers. More in a later post… For now, a few points…

First-Time Home-Buyers:

The Good—First-time home buyers will get a tax credit up to $7500 or 10% of the purchase price, whichever is smaller. So, a homebuyer who owes say $1500 in taxes would apply the credit and get a $6000 refund. Good deal!

The Bad: This is for single first-timers with incomes up to $75,000 or married $150,000 when it gradually phases out at incomes of $95,000 and $170,000 respectively.

The Ugly: This credit is paid back in equal installments over the next 15 years, so it’s really more of an interest-free loan. The program is for first-timers who buy between April 9, 2008 and July 1, 2009.

Current Homeowners:

The Good: For those homeowners who take the standard tax deduction and do not itemize, single taxpayers will get a $500 deduction and married, filing jointly, $1000.

The Bad: This will mainly benefit those who pay little or no mortgage interest; otherwise, they would be itemizing.

The Ugly: Homeowners will need to report any property taxes paid and, if that sum is less than $500 or $1000, the deduction will be limited to the property tax paid.

Returning Military:

The Good: Instead of 90 days, lenders must wait 9 months before they can foreclose on returning military personnel. Lenders must wait 1 year before they can raise interest rates on the mortgages of returning military.

The Bad: These provisions expire December 31, 2010.

The Ugly: This is not in the bill, but the sad fact is that many returning military find they no longer have jobs, they are now incapable of performing their previous jobs or their previous employers have been downsized or gone bankrupt.

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