Three Things Homeowners Can Look Forward to in 2009

For many homeowners, 2008 was a pretty rough year as mortgage lending tightened and home values declined significantly. Fortunately, the recent American Recovery and Reinvestment Act of 2009 proposed a few key issues which homeowners can now look forward to in 2009. Many of the issues are related to mortgage lending and qualifications, while some issues can actually put as much as $8,000 into home buyers pockets before the year's end.

1. Reinstatement of High Cost Conforming Loan Limits

Fannie Mae and Freddie Mac announced that the "high-cost" conforming loan limits would be $729,750 once again in 2009. For homeowners, this is a major piece of news as it can directly affect mortgage rates--sometimes making a difference up to one full percentage point. More importantly, conforming loan limits can often mean the difference between being qualified or getting rejected for a new home loan. Additionally, higher conforming loan limits restore more confidence in mortgage guarantees, which in turn allows mortgage lenders to offer more home loans. Especially in high-cost areas such as parts of California and Florida, the reinstatement of higher conforming loan limits gives homeowners a bit of breathing room and more mortgage options.

2. Mortgage Modifications and Lender Incentives

As foreclosure filings continue to rise throughout the nation, the government hopes to increase mortgage modifications of existing home loans to prevent such defaults. Specifically, a 75 billion dollar program was set up to stop the rising number of foreclosures by targeting about three to four million at-risk borrowers. The program also includes lender incentives to encourage these loan providers to work with their borrowers. In a mortgage modification, qualified borrowers typically apply to have their loan modified to make their monthly mortgage payments more affordable--first by an interest rate reduction, then lengthening the term of the loan, and finally a principal reduction if needed.

3. Tax Refund and New Home Buyer Credit Incentives

Also new for 2009 is another tax incentive for first time home buyers who purchase a home before December 2009. These first time home buyers can claim 10 percent of their purchase price, up to $8000, for an eligible tax credit. Unlike the tax credit offered in 2008, this new 2009 home buyer incentive does not have to be repaid, and can be claimed on either their 2008 or 2009 tax returns. So in addition to having the credit increased by 500 dollars, the incentive is a more of a true credit than its predecessor, which resembled more a temporary loan.