How the Stimulus Will Help Home Buyers

The government is taking a multi-faceted approach to helping both existing home owners as well as prospective home buyers thru the recently passed economic stimulus plan. There are three priorities the government has established to help find a floor to this housing crisis – creating jobs, tax credits for first time buyers and modifications of loans for existing borrowers – and they are committing the necessary funding to back it up.

There is no way to curtail this housing crisis when more people are losing jobs than acquiring them. The government recognizes this and is working diligently to reverse that trend. President Obama has pledged this bill will create or save over 3.5M jobs over the next few years. This will have a profound affect on the housing market because as peoples fear subsides & income is more dependable, mortgages can be paid on time, brought current, and people without a loan will again look into acquiring a home. As many American homeowners now have unfortunately found out, when income is not stable it becomes hard to pay your mortgage – let alone all of your other bills. Creating jobs & allowing many of the currently unemployed folks back into the work place is the first, best and most necessary step toward our road to recovery.

Loan modification is a term many people had never heard of until 2008. Now everyone is aware of this term and it is a key program to keeping existing homeowners in their homes. As President Obama points out, this will not help everybody, but it will help a lot of people. From government projections, modifications will help 7-9 million people save on average $2200 per year, and the assistance will be felt in a combination of ways. First, they are assisting in lowering the principle owed for homeowners whose homes value is less than the loan against it – which accounts for approximately 27% of all existing homeowners, or 13.8 million Americans. Also, for those people whose houses aren’t under water but are still having a hardship, the government has proposed to renegotiate the terms of the loan;; interest rate & length of loan. This will benefit many Americans, specifically those who are in short term ARM loans, negative amortization loans or higher interest loans by lowering monthly payments to affordable levels while fixing the adjustable terms of the loan.

Lastly, to stimulate home buying and ownership the government has pledged an $8k tax credit for most first time home buyers, defined as those who have not owned a home in at least 3 years and plan to live there as a primary residence. This will help comfort the people who want to buy, but are waiting for a little better deal, as well as some people paying into higher tax brackets. Essentially you will be able to write off an additional $8k on your taxes if you buy in 2009, and if you purchase prior to filing your 2008 return the adjustment will reflect as though you purchased on December 31, 2008 so you can realize the benefit immediately.

In light of all the negativity in the news and media, now is the most opportune time prospective home buyers have seen in many years, and for most their entire lifetime. Rates are low, sellers are negotiating, banks want to unload their foreclosed properties and the government is helping buyers who are willing to take the risk of being a homeowner. Most prospective buyers 2-5 years ago complained that prices were too high and houses were all getting multiple offers. Well, things have changed quite drastically, and its to the buyers benefit; so if you are looking to buy a home for the right reasons – you need a place to live, want pride of homeownership & could use the tax breaks – this turbulent time we are in right now is most likely the best home buying opportunity of your life time. And as with everything in life, there are risks and rewards, pros and cons and definite uncertainty, but there is great opportunity as well. With all of that said, combined with the aid the government is kicking in, now is definitely a time to consider your home buying options.


If you have any questions regarding your current loan or this stimulus package, don’t hesitate to contact George at (650) 558-5326 or email at George@RedOakCorp.com.