The mortgage industry is hurting, values are down, and relief is coming; but there is a catch. A big catch if no one is reading the fine print. 

First-time homeowners. 

The Rescue Part… 

You will get a tax credit of up to $7,500 – provided you have not owned a home in three years. That is a tax “credit” not to be confused with a tax “deduction.” 

The Catch… 

That money has to be repaid starting two years after you purchase the home. If you take the full $7,500 tax credit, your tax bill will increase $500 a year for fifteen years.  If you sell the home early, you will owe the government the balance.

Forgiveness for refinancing. 

The Rescue Part… 

In a nutshell if you wish to refinance the lender forgives all debt above 90% of the homes current value. You then get a new mortgage that is insured by the FHA. 

The Catch… 

First off you will need to pay a FHA insurance premium of approximately $2,700. Secondly, you will have to share your homes appreciation with the FHA. If you sell your home (or payoff the loan) less than a year after refinancing, the FHA gets all of the home appreciation. One to two years? FHA gets 90%. It then decreases at 10% per year but never lower than 50%.

I know this plan seemed great when it was being thrown around in the media and during political campaigns, I just hope people are reading the fine print.