New limits to FHA allowable closing costs.

One of the major benefits to seeking an FHA (Federal Housing Authority) insured loan over a conventional loan is that the allowable closing costs contribution by the seller could be as high as six percent of the value of the home. With a conventional loan the maximun allowable amount is usually three per cent.

Well under new guidelines proposed by FHA this allowable closing help is going to be reduce to not more than three per cent. This will have an impact on home sales as many first time purchasers are short on cash and need the maximum closing assistance to buy a home. I don't think the impact will be serious but it is not going to help in this slow market that we are currently mired in. The date is not set in stone but look for this change to come about in the next month or so.

New tax credit for first time buyers

If you are a first time homebuyer then the new stimulus bill has a great little gem for you. In cluded in the bill is a provision for an $8,000 tax credit for 1st time homebuyers (defined as not owning a home the last three years just like the current provision) but it is a pure credit. There is language about possible repayment in first three years if sold. This bill has yet to be signed by the president but it is expected that he will do so shortly.

As far as I can tell this is a real tax credit, so you can in effect knock you taxes down by this figure in the year that you purchase your home. As always, you should check with your accountant to make sure how this provision will apply to you.