Good Borrowers, Better Loans: New Legislation Eases Credit Crunch

We’ve all seen it. In recent months, even borrowers with good credit have become caught up in the credit crunch. The lenders, Fannie Mae and Freddie Mac have all tightened their lending restrictions. Some of this – such as the elimination of the all-too-easy credit that got us into this mess – is a good thing and will help to correct the housing market.

Yet some of it appears overly restrictive to observers, and passes the risks within the market along to good borrowers. For instance, in new condominium buildings that are not yet FHA-approved, some lenders have been requiring 10% or 15% down before they’ll provide a loan. These types of restrictions eliminate otherwise qualified buyers who have a 3% or 5% down payment in hand – the very type of good buyers that will help the housing market to right itself.

However, the Housing and Economic Recovery Act of 2008, a bill recently passed by Congress, will make it easier for good borrowers to get good loans.

Perhaps the biggest thing, beyond the $7,500 tax credit, is that FHA insured loans are getting cheaper. The FHA rates are more competitive with typical bank rates, the required down payment amount is 3.5%, and the mortgage insurance amount for those buyers that are putting down less than 20% (most of the market) is significantly cheaper than a conventional loan. Overall, this will make it cheaper and easier for buyers to get financing.

Other improvements that are taking place as a result of this legislation include:

• The elimination of seller-funded down payment assistance programs (which helped to facilitate increased foreclosures and other problems)

• Simplification of condominium project approvals (it will be easier for a buyer to get a good loan when buying a new condo)

• Higher mortgage loan limits (qualified buyers purchasing properties up to $271,050 can go FHA – providing them with a better financing option with lower mortgage insurance and 3.5% down payment requirement)

For more information, please click here.

To read the bill (HR.3221), please click here.

First Time Homebuyers Eligible for $7,500 Tax Credit

The U.S. Congress and President Bush recently passed the Housing and Economic Recovery Act of 2008. The legislation provides a first-time homebuyer tax credit of up to $7,500 (10 percent of the cost of the home, not to exceed $7,500).

Eligible properties include any single-family residence (including condos and co-ops) that will be used as a principal residence. Homebuyers must not have owned a principal residence within the last three years.

The tax credit means that if you are a first-time homebuyer and would otherwise owe $7,500 in taxes, then for the year in which you purchased the home, you would owe the IRS nothing.

The tax credit terminates on July 1st 2009. However, first-time homebuyers are eligible if they purchased a home after April 9th 2008.

The tax credit has an income limit: individuals earning no more than $75,000 or couples earning no more than $150,000 on a joint return. The credit is phased out above those caps ($95,000 and $170,000 respectively).

The tax credit must be repaid, over a period of 15 years. For instance, if you earn a credit of $7,500 then you would pay $500 per year over 15 years. This amounts to a zero interest loan from the federal government. If the home is sold before 15 years, then the remainder of the credit would be recaptured upon the sale. If the home does not sell for enough to repay the credit, then it is forgiven.

For more information, please visit www.federalhousingtaxcredit.com.

Ohio Fourth Nationally in Biotech Growth, Spending and Research

Business Facilities Magazine recently released what’s being called one of the most detailed surveys ever to examine biotech growth, spending, and research.

Measuring all 50 states, it placed Ohio fourth - tied with Texas - in the overall rankings, and called the state a national leader in the field.

Jack Rogers, Business Facilities Editor-in-chief, told WCPN 90.3 that “the states that are doing really well are the ones that have coordinated efforts, that are leveraging university systems and laboratory initiatives and the institutions that they have and they’re really putting the whole thing together.”

More than 20 separate categories were considered to compile scores, and Ohio’s $146 billion-dollar bioscience economy involving more than 800 companies and organizations put the state among the national leaders.

The Third Frontier project - begun during the Taft administration to create high tech jobs - was praised for allocating more than $350 million dollars to biosceince-related development and commercialization. Also noted were education and research facilities at CASE, Ohio State, and the University of Cincinnati.