5 Things about the "Hope for Homeowners Act" Every Homeowner Should Know

The Housing and Economic Recovery Act is much more than a simple bill to help economically disadvantaged  homeowners. The massive program punishes predatory lenders, slashes mortgage debt and reduces property taxes for people with homes valued as high as $625,000 - But some experts predict the act may be underfunded and could leave behind thousands of homeowners who fail to act quickly. The key to participation in the program for most homeowners is a new or refinanced loan through the Federal Housing Administration (FHA).

Here's five things about the act that every homeowner should know.

Reduces total mortgage debt not just the interest.

• The minimum reduction to total mortgage debt provided by the program is 10% but for homeowners refinancing into an FHA loan the savings can be significantly greater. In addition, lenders who hold your old loan must waive any penalties or fees, and help pay for the origination and closing costs of the new loans.

• New and refinanced loans are based on your ability to repay , ensuring affordability and sustainable homeownership.

  The latest programs make it even more important for at-risk homeowners to  get help to quickly determine which plan best fits your situation.

Provides up to $ 8,500 in tax credits for current or future homeowners.

• The Act creates a refundable tax credit for first-time homebuyers that works like an interest-free loan of up to $7,500 (to be paid back over 15 years).

• Couples who refinance under the program can take an additional  $1,000 deduction for property taxes ($500 for individuals).

• Even homes in affluent housing markets can qualify for low-interest FHA loans under the program. The new law raises conforming loan limits for the FHA to $625,500 but only primary residences are eligible: No investment properties, second or third homes will qualify.

• Loans provided under this program must be 30-year fixed rate loans. Adjustable rate mortgages and other types of creative financing that led to the current crises are discouraged.

• The U.S. Department of Housing and Urban Development says homeowners who want to participate should not wait for the law to take effect but should apply with an FHA-approved lender immediately!

  How to Determine Eligibility

  • In person or by phone: Contact an FHA-approved lender to determine eligibility.

  • Online: Lending Tree provides a free no-obligation tool to help borrowers quickly determine eligibility.

Information source for this article is the U.S. Department of Housing and Urban Development. (www.hud.gov) Please use the information for informational purposes only. This document is NOT intended as legal advice. TXDILAR and Davick Services are not associated with any government agency.