What the new stimulus plan means for homebuyers and owners

On Tuesday, February 17, 2009, President Barack Obama signed the administration's sweeping stimulus package into law.

The stimulus plan, officially known as the American Recovery and Reinvestment Act, includes four primary provisions designed to benefit homebuyers and owners. Here is a brief overview on how those provisions may benefit you if you're thinking about buying a home or you're already a homeowner.

Expansion of First-time Homebuyer Tax Credit

The tax credit for first-time buyers for homes has increased from $7,500 to $8,000. Unlike the $7,500 credit, this credit does not need to be paid back as long as the buyer lives in the home for at least three years. The income limitations remain the same for this credit ($75,000 for singles and $150,000 for married couples) as does its refundable status (if you owe less than $8,000 in taxes on your 2009 tax returns, the IRS will refund the difference). Purchase of the home must be completed by 12/01/09.

Higher Reverse Mortgage Loan Limits

The loan limit for reverse mortgages insured by the Federal Housing Administration (FHA) has increased nationwide from $417,000 to $625,500. And, as the FHA program is virtually the only reverse mortgage program still currently operating, this is an especially important provision that presents an opportunity for senior citizens to obtain much needed funds.

FHA and Conforming Loan Limits Restored in High Cost Areas

Originally, the maximum limit for FHA and conforming loans in 2009 was going to be reduced. The stimulus plan restores the 2008 maximum amount limit of $729,750, thus making higher cost homes more affordable.

Source: American Recovery and Reinvestment Act of 2009.