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real estate

Federal Rescue: Provisions for Buyers and Sellers

Find out if you can benefit from recent housing legislation.

The Housing and Economic Recovery Act includes temporary provisions meant to entice buyers back into the market -- good news for sellers. Some highlights of the legislation:

Tax credit for buyers. First-time home buyers (or anyone who hasn't owned a principal residence for at least three years) get a tax credit equal to 10% of a home's purchase price up to $7,500 ($3,750 for married people filing individually). The deal begins retroactively with purchases made in April 2008, and ends next July 1.

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Buyers won't get cash at closing. Instead, they can adjust their withholding to reflect the credit or anticipate a refund check after claiming it on their 2008 or 2009 tax return. Two years after the year of purchase, buyers will have to begin repaying the credit in equal installments over 15 years -- ultimately making this an interest-free loan from Uncle Sam.

A larger standard deduction. Homeowners (buyers or sellers) who don't itemize may increase their standard deduction by either the amount they pay in property taxes in 2008 or $500 ($1,000 for a married couple filing jointly) -- whichever is less.

No more down-payment assistance programs. In some markets, sellers had relied on seller-funded down-payment assistance programs (the seller "donates" money to a nonprofit organization; the nonprofit provides down-payment money to your buyer). Because many such deals ended in foreclosure, Congress has turned off the tap.

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Bigger conforming jumbos. The law reset the conforming-loan limit (the maximum loan that Fannie Mae or Freddie Mac will guarantee) in high-cost areas, beginning in 2009, to 115% of the local median home price to a maximum of $625,500 (150% of $417,000). Buyers seeking loans exceeding that amount will have to pay more for them.

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