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While home prices remain low, they're no longer free-falling in most markets. Mortgages are historically cheap. And the sweet tax credit that was offered to new buyers last year has been extended to April 30 and expanded to include current homeowners too.

"It's a good time to buy, but it's still a really difficult market," says Patrick Newport of IHS Global Insight. As the clock ticks toward the tax-credit deadline, answer these questions to decide whether it's time to get off the sidelines.

Can you really nab that tax credit?

Current homeowners who sign a contract to buy a home on or before April 30 get a dollar-for-dollar reduction on their taxes of 10% of the purchase price of the home, up to a maximum of $6,500 (first-time buyers can get up to $8,000).

But according to the National Association of Realtors, buyers spend about 12 weeks home shopping before making an offer, so if you haven't already started looking, you may be pressed to meet the deadline.

Plus, to qualify for the full credit, your household income must be under $225,000 if you're married and less than $125,000 if you're single; repeat buyers must have lived in the home they are selling for five of the past eight years. The good news: Once you've signed the contract, you have until June 30 to close the deal.

How much could you lose by waiting?

Besides the loss of the tax credit, the biggest game-changer facing buyers is a potential jump in mortgage rates. If the Fed moves ahead with its plan to stop buying mortgage-backed securities at the end of March, the rate on a 30-year fixed mortgage is expected to increase nearly a percentage point from today's 5.18% to 6.1% by the end of 2010, according to the Mortgage Bankers Association. On a $300,000 fixed-rate mortgage, that's an extra $174 per month.

But if home values are falling in your area, you don't have much to lose by waiting. If the house you want costs $375,000 today and you put down 20%, you'd pay $1,644 a month for a fixed-rate mortgage at 5.18%. Buy that same home for 5% less later on with rates at 6% and you'd only pay an extra $65 a month. If prices plunge 10% or more this year (as they are expected to in 12% of markets, according to Fiserv), you'll come out even or ahead.

To get a handle on the direction of your market, check trulia.com to see whether inventory levels are increasing, and visit realtytrac.com to find out whether foreclosure filings are still rising. A glut of properties and bank-owned homes means a recovery may not be in sight.

How quickly can you sell the home you now own?

Even in markets that are recovering, sellers must price aggressively to make a fast deal.

"Everybody thinks their house is worth more than it is," says Dallas realtor Bruce Lynn. Before you sign a contract for a new place, ask a few agents to give you a realistic figure that will generate a quick sale. Can't bear to part with your home at that price? Waiting may be your only option.

Also keep in mind that, with the credit crunch not far in the past, lenders may not approve your purchase until you've sold your home. A delay in sale could also stick you with two mortgages, far outstripping any savings from the tax credit.

See if the sellers will let you put a contingency in the contract that negates the sale if you don't find a buyer -- it's a long shot but worth a try. If they won't, propose adding a kick-out clause that allows the sellers to keep their home on the market, but lets you either pull out or quickly move ahead with the deal if they get another offer.

While extra contract negotiations may be a hassle, the past few years have proved that a purchase decision shouldn't be taken lightly. "This may be the best time in history to buy a home," says Denver realtor Jeff Fogler, "but only if you can really afford it."

Seriously delinquent FHA loans, those 90 days or more late, jumped 62.1% in the past year to 558,944, or 9.4% of FHA loans, as of the end of January, according to agency statistics released on Friday.

"The FHA default rates are increasing at a slower rate than even prime mortgages," he said.

But the reason for this increase may be more of a statistical glitch than an actual trend. Loans that go into the seriously delinquent bucket stay there far longer, boosting the numbers and making comparisons problematic, said Jay Brinkmann, chief economist for the Mortgage Bankers Association (MBA).

Many lenders and servicers are overwhelmed by sheer volume of loans and are reluctant to take back homes they don't think they can sell. As result, they keep the loans hanging out in the 90-day late bin rather than moving them into foreclosure.

Lenders are also trying to modify more mortgages, which can take months to accomplish. Meantime, many of the borrowers sit in the seriously delinquent bucket.

In contrast, loans that are 30- or 60-days late actually declined in the past year, according to the FHA.

Until the mortgage bubble burst, FHA loans made up a small portion of the housing market. Now, the agency originates almost a third of all home loans. That means most of the agency's notes were issued in the past three years -- when prices were plummeting.

"There are a lot of young loans in the FHA book," said Mike Fratantoni, vice president of Single-Family Research and Policy Development at the MBA. "Mortgages typically hit their peak delinquency rates two or three years after origination."

Those early years are toughest because many borrowers have struggled to afford their homes and their incomes have not risen enough to offset any setbacks.

Additionally, the price drops pushed many FHA borrowers underwater. These homeowners only had to put 3.5% down to start, so they could quickly end up owing more than their homes were worth in places where values plummeted 20%, 30%, 40%.

Once these mortgages clear the system, the FHA portfolio should emerge in sound condition. Recent FHA borrowers have been of high quality; their average credit score has risen 33 points in the 12 months through December to 694 and is up from the low 600s a few years ago.

Some FHA mortgages are simply bad loans. After subprime lending froze in 2007, overly aggressive mortgage originators, who could no longer hook up borrowers with subprime loans, turned to FHA loans for their risky clients.

Commission loan officers and rogue mortgage brokers pushed the envelope of who qualified for FHA loans, according to Allen Hardester, a Columbia Md.-based mortgage consultant. They pushed the edge on debt-to-income ratios, credit scores and loan-to-value ratios.

"They took advantage of lax underwriting by FHA to interpret the guidelines broadly," he said.

The resultant delinquencies have not persuaded FHA to impose risk-based pricing, in which borrowers pay more if they have lower credit scores. But the FHA does now require that borrowers with FICO scores of less than 580 put down at least 10% of the sale price, rather than the 3.5% minimum requirement for more qualified borrowers.

And the agency has also eliminated seller-assisted down payment programs, which HUD has said accounts for a disproportionately large share of FHA delinquencies.

In these transactions, sellers kick back the down payment to homebuyers, usually through a third party. The result is that buyers have no "skin-in-the-game," which makes the loans more attractive to risky borrowers.

Commissioner Stevens said the FHA is on a sound financial basis. Its primary reserve fund is at $32 billion, its highest level ever. There's a secondary reserve that has fallen below its mandated level, but the FHA has taken steps to boost it. It recently asked Congress to increase the monthly fees it charges borrowers to insure their loans.

Rule No. 1: Repairs get the biggest returns

The smartest money now goes into "undeferring" needed maintenance. That's because while buyers might appreciate enhancements like Jacuzzis and Sub-Zeros, they won't tolerate a house with a leaky roof or antiquated plumbing. "If a property is known to have issues, today's buyers won't even look at it," says Austin real estate appraiser Jim Amorin.

And trying to keep problems a secret can cost you big-time. If buyers discover them during inspection, it's now common practice to ask sellers not only to pick up the tab for the repair but also to pay a penalty to compensate the buyer for the inconvenience of having work done.

So the $20,000 you saved by putting off a roof repair, say, could turn into a $30,000 credit to the buyers at closing, says Amorin.

Rule No. 2: Remodeling beats adding on

McMansions have gone the way of the SUV -- and large additions don't pay off either. "There's been a fundamental shift toward quality over quantity," says Warwick, R.I., real estate agent Ron Phipps.

Having a big, formal living room plus an everyday family room is less desirable than having one multi-use common space. So rather than adding on, you're better off repurposing existing square footage by reconfiguring the floor plan or capturing unused basement or attic space.

Want an eat-in kitchen? Knock down the wall between the kitchen and dining room ($2,000 to $8,000, depending on whether it's load-bearing or contains plumbing). That will instantly create a large eat-in kitchen and give the whole house a more open feel -- without a huge investment to make up at resale.

Rule No. 3: Eco-friendly upgrades can save cash

Some green improvements pay you back long before you sell your house. Install energy-efficient features, such as EnergyStar appliances and extra wall insulation, and you'll see lower energy bills every month.

Add in the federal tax credit of up to $1,500 that lasts through 2010, plus many local rebates and tax incentives (see dsireusa.org), and the work may pay for itself in just five years. Green features are also increasingly a selling point, says Phipps. "Most people in the market right now are first-time homebuyers in their thirties, and they've been raised to care about carbon footprints and being ecofriendly," he says.

The best way to go green is with a while-you're-at-it job: When it's time to replace your furnace, for example, upgrading to super-efficiency might add only $500 (after tax credits), compared with standard new equipment, but it will save you -- and your buyers someday -- $150 or more in annual heating costs.

Rule No. 4: Tech infrastructure trumps cool gadgets

Home electronics seem like a deal, since prices have fallen about 50% over the past three years and continue to drop, according to Stephen Baker, president of industry analysis at NPD Group, a market research firm.

Still, that doesn't change the fundamental problem with expensive built-in technology: Put in a $10,000-plus dedicated home theater today, and something better will come along tomorrow and make your system look as if it's from the Mesozoic Era. With buyers seeking any excuse to low-ball their offers, they're not going to reward you for an out-of-date system.

Tech infrastructure is different, however. Anytime you're opening up walls for a construction project, have cabling and Ethernet ports installed. At about $80 a room, it's a low-cost way to provide the capability for whatever technologies come along.

Rule No. 5: Let the Joneses be your guide

During the boom, you could be the first on your block to have a luxury kitchen, spa bathroom, or in-ground pool and count on others following suit. And even if the neighbors never took your lead, there was plenty of equity growth to cover your costs.

Nowadays that fudge factor is gone. "You really have to keep your house's amenities in line with the neighborhood now," says Kermit Baker, director of the remodeling futures program at Harvard University's Joint Center for Housing Studies.

If other houses on the block have real marble countertops, by all means add one to your house, but if everyone still has faux blue-marble Formica from the '70s, you're not getting your money back.

Also, keep your projects design-neutral so they'll appeal to the greatest number of people. Choose neutral colors and traditional electrical and plumbing fixtures unless your house has a modern architectural style.

Rule No. 6: The new payback time is five years

As with any volatile investment, the longer your time frame, the lower the risk. Don't take on a big project if you're likely to move in less than three to five years. There's just too much chance that any money you put in -- aside from necessary repairs or superficial cosmetic work -- could be lost while the housing market continues to meander.

But if you plan to stay awhile, don't delay starting a project. Home improvements are a bargain right now, with contractors bidding 10%, 20%, even 40% lower for the same work than just a year or two ago, says Bernie Markstein, senior economist for the National Association of Home Builders.

Grab them while they're hungry for work and make it clear that you'll be getting multiple bids so they'll be motivated to undercut one another's prices. You'll fulfill the first rule of investing: Buy low. Then hope that when you're ready to move, you can sell high.

Wrong.

 

Vanessa Corey

Former homeowners may still be on the hook if there's a difference between what they owed on their mortgage and what the bank could sell it for at auction. And these "deficiency judgments" are ticking time bombs that can explode years after borrowers lose their homes.

It can even happen to people who got their bank to approve them selling their home for less than it is worth.

Vanessa Corey, for example, short sold her Fredericksburg, Va., home in April 2008. She and her husband built the house in 2004, but setbacks, both personal (divorce) and professional (housing bust), made it impossible for the real estate agent to keep her home. So she negotiated the short sale and thought that was the end of it.

"My understanding was that the deficiency was negotiated away," she said. "Then, last November, I got a letter from a lawyer telling me I owed my lender $65,000. I had to declare bankruptcy. There was no way I could pay it."

Many homeowners are now in the same boat. And not just those who took out bigger loans than they could afford or who did so called "liar loans" where they didn't have to verify their income.

Because of falling home prices, borrowers who always paid their mortgage but who have run into unforeseen circumstances -- like unemployment or a job transfer -- can no longer sell their homes for what they owe. As a result, they are being forced to short sell or foreclose and are getting caught up in deficiency judgments.

"After the banks foreclose, it's very common now to have large deficiencies with houses not worth the balances owed," said Don Lampe, a North Carolina real estate attorney.

Lenders mostly declined comment. Although Corey's lender, BB&T did indicate it was pursuing more deficiency judgments.

"They follow the rise and fall of foreclosures," said the spokeswoman, who would not discuss Corey's account.

Whether banks can and will pursue deficiency judgments depends on many factors, including what state the borrower lives in and whether there's a second mortgage or other liens. But if borrowers ignore the possibility of deficiencies, it could haunt them.

"Once they have a judgment, they can pursue you anywhere," said Richard Zaretsky, a board-certified real estate attorney in West Palm Beach, Fla. "They can ask for financial records, have your wages garnished and, if you fail to respond, a judge can put you in jail."

In the case of foreclosure, lenders can pursue deficiencies in more than 30 states, including Florida, New York and Texas, according to the U.S. Foreclosure Network, an organization of mortgage law firms.

Some states, such as California, are "non-recourse" and don't allow deficiency judgments. But, even there, if the original loan was refinanced, some or all of it may be subject to claims.

Deficiency judgments on short sales and deeds-in-lieu can happen in many more places. In these cases, extinguishing the debt is often a matter of negotiating with the bank.

But even when lenders are willing, many borrowers may not be aware that they have to ask for release. So, if you are pursuing a short sale, be sure your attorney asks the bank to release you from any further obligation.

"People shouldn't have a false sense of security that a deficiency judgment may not be later sought," Zaretsky said.

He expects many will be filed over the next few years, based on the fact that banks have sold many of these accounts to collection agencies and other third parties, at discount.

"The parties who bought those notes wouldn't have paid money for them unless they had the intention of acting," Zaretsky said.

What can be scary is that the judgments don't have to be obtained immediately. Lenders or collection agencies may wait until debtors have recovered financially before they swoop in. In Florida, the bank can wait up to five years to file. Once the court grants a judgment, the lender has 20 years there to collect, with interest.

It doesn't have to be a large amount of debt for a lender or collection agency to come after borrowers. Richard Varno and his wife short sold their Nashville home back in 2004 after he lost his job.

It wasn't until 2008, when the second lien holder asked him for $25,000, that he realized he still was liable.

"I told them, 'Hey, you guys released the title,'" he said. "As far as I know, I'm off the hook."

He wasn't. Releasing title does not necessarily end the debt. It's complicated because of variations in state law, but, generally, a mortgage has two parts: a pledge of collateral, represented by the home, and a promise to pay off the loan.

Lenders may release property liens in order to facilitate short sales without releasing borrowers from their obligations to pay under the promissory notes. The secured debt can convert to an unsecured one after the sale.

Zaretsky had one client who was so relieved to have arranged a short sale that he signed every paper his real estate agent shoved at him, even a confession that clearly stated he still owed the debt.

"He had no idea what he was doing," said Zaretsky. "All the lender had to do was go to court to convert the confession into a deficiency judgment."

Lenders are also very inconsistent. One of Zaretsky's short-sale clients was ready, willing and able to pay, but the bank did not even ask; another lender always reserves the right to pursue the deficiency.

Sometimes lenders go after borrowers walking away from their homes if they have other assets, according to Florida real estate attorney Larry Tolchinsky.

"Banks are pulling credit reports to see if it's a strategic default," he said. "If you're behind on all your other payments, you're okay. But if you're not, they'll come after you."

If borrowers have any doubts about their risks, they should seek legal advice. Or, at least, call non-profit organizations such as NeighborWorks for advice. According to Doug Robinson, a NeighborWorks spokesman, its counselors always try to negotiate away deficiencies when they facilitate short sales or deeds-in-lieu.

"We don't favor any short-sale contracts that leave any deficiency that can be pursued," he said.

Robinson himself knows what can happen. He paid off a deficiency after his own New Jersey house went through foreclosure 11 years ago.

The seasonally adjusted annual rate of new home sales dropped 7.6% to 342,000 last month, compared with a revised rate of 370,000 in November, the Census Bureau said.

Analysts surveyed by Briefing.com had expected December sales of new homes to hit an annual rate of 366,000.

"This is not a very encouraging number," said Mike Larson, a real estate analyst with Weiss Research. "You've got aggressive competition from banks and lenders trying to unload foreclosures, and many people are going to the existing home market because that's where the bargains are."

The largest December decline occurred in the Midwest, where the sales rate plunged 41% over the last 12 months.

While the market for new home sales has improved in the wake of the housing crisis, levels remain far below the July 2005 peak, when sales of new construction spiked to an annualized rate of nearly 1.4 million.

The rate of new home sales in November also disappointed analysts, plummeting 11.3%.

"What might be impacting sales in the last two months is a hangover effect because demand pulled forward earlier," said Larson. "What you're now seeing is the waning impact."

Price and inventory: There were 231,000 new homes for sale at the end of December. This marks the 32nd month of decline and leaves supply at the lowest level since April 1971, said Larson.

The current supply is enough to last for 8.1 months at the current sales rate, the Census Bureau said.

The median price of new homes sold in December was $221,300, up from $217,400 in the previous month. The average sales price was $290,600.

On Tuesday, the National Association of Realtors released its report on existing home sales for December, which sank 16.7% month-to-month to an annual rate of 5.45 million units.

Outlook: "These are some of the lowest levels in U.S. history," said Larson. "We're not going to see this go on forever, we're going to see rates stabilize."

Larson expects an uptick in demand, but not until "well into next year," once existing home inventory stabilizes.

"We're still oversupplied in that market, so until we work off that inventory we're not going to see anything spectacular happening in the new home market."

The Obama administration has vowed to help homeowners by bringing new refinance programs to American homeowners nationwide and has also vowed to bring new foreclosure prevention programs into action such as revamping the FHA Hope for Homeowners refinance program which allows homeowners to refinance into a stable 30 year fixed mortgage even if they are upside down in value. In addition to those measures FHA loans now have some of the most flexible terms and some of the lowest rates out of all available mortgage products. With an FHA refinance loan you can expect low rates and easy qualifications.

Congress passes FHA Modernization Bill!

The HOPE NOW Plan will help subprime borrower's who can afford the current, starter rate on their subprime mortgages, but not be able to make the higher payments once they adjust.

You would have had to finance your current mortgage from January 1, 2005 through July 30, 2007, and will cover loans that had been scheduled to rise to higher rates between January 1, 2008 and July 31, 2010.

The 3 ways that HOPE NOW members (Major Banks) have agreed on a set of new industry wide standers to provide relief to these borrowers are:

1. To Refinancing a existing loan into a new private mortgage.

2. To Refinance into a FHA Secure Loan.

3. To Freeze the current interest rate for five years.

Securing the American Dream for Homeowners Nationwide

FHARefinanceMortgages.com is structured to be THE definitive resource for FHA refinancing on the whole Internet. We are not sponsored by any bank or broker and our information comes directly from the FHA and HUD so that you can ensure sound advice that focuses on your needs not the needs of your mortgage broker or bank, our only concern is your wellbeing.

We are a community based website bringing FHA experts and homeowners together on a free neutral platform where you can feel free to ask any questions or just browse our current information on FHA mortgages.

Feel free to browse the site and feel free to ask questions whenever you need. Our goal is to help as many Americans as we can refinance their adjustable rate mortgages, get cash out, and even save your home from foreclosure. Everything on this site is completely free and we encourage you to visit our Forums where you can interact with our FHA specialists and ask questions for free.

WASHINGTON DC -- Fannie Mae (FNM/NYSE) today began making two new initiatives -- Home Affordable Refinance and Home Affordable Modification -- available to its servicers and borrowers as part of the Obama Administration's Making Home Affordable program. The two initiatives are designed to significantly expand the numbers of borrowers who can refinance or modify their mortgages to a payment that is affordable now and into the future.

"Making Home Affordable provides crucial tools to mortgage lenders and homeowners coping with financial hardship and declining home prices," said Herb Allison, president and chief executive officer. "Potentially millions of homeowners could qualify for and benefit from these initiatives. The people of Fannie Mae will do all they can to make the program a success for homeowners across America and to advance the nation's housing recovery."

Home Affordable Refinance

Home Affordable Refinance includes new refinancing flexibilities for homeowners whose loans are owned by Fannie Mae. Key features include:

• Additional Flexibilities: Most borrowers refinancing an existing Fannie Mae loan will not be required to buy new or additional mortgage insurance if the loan at the time of the refinance is more than 80 percent of a home's value. Any existing mortgage insurance may be carried forward to the new loan. In addition, Fannie Mae can refinance loans up to 105 percent of a home's value with this new flexibility, so even borrowers who are "underwater" -- who owe more than their home is worth -- may be able to refinance. This will expand the number of borrowers able to take advantage of lower interest rates that reduce monthly payments, or refinance into a more sustainable mortgage.
• Streamlined Processing: Beginning in April, all 1,600 lenders and 29,000 mortgage brokers using Fannie Mae's Desktop Underwriter® platform will be able to process an application to refinance any existing Fannie Mae loan, allowing for greater lender origination capacity and easier refinancing for borrowers.

Home Affordable Modification

Through the Home Affordable Modification, Fannie Mae will work with loan servicers across the country to help distressed borrowers modify their current loan into a mortgage that is more affordable and sustainable. Loan servicers participating in the program may reduce interest rates, lengthen the payment time frame or take other steps, such as principal forbearance, to bring the monthly payments down to as low as 31 percent of the borrower's gross (pre-tax) income.

To ensure borrowers currently at risk of a foreclosure have the opportunity to apply for a Home Affordable Modification, Fannie Mae servicers have been directed not to proceed with a foreclosure until a borrower has been evaluated for the program.

Finding Out if a Loan is Owned by Fannie Mae

Borrowers can find out if their loan is owned by Fannie Mae in one of two ways:

• Call your current mortgage lender or servicer. The phone number should be on your monthly mortgage statement or monthly coupon book.

• Contact Fannie Mae. Call 1-800-7FANNIE (8 a.m. - 8 p.m. EST) or visit http://www.fanniemae.com/homeaffordable.

Fannie Mae also intends to make an online tool available later this month so borrowers can look up their loan and determine if it is owned by the company.

Details remain scarce, but officials are looking to help homeowners who are in danger of defaulting on their mortgages, as well as those already behind, according to sources close to the discussions. Until now, most government and industry efforts have centered only on the delinquent.

The administration is under intense pressure to find a solution to the housing crisis, which many experts say is crucial to reviving the overall economy. More than a million homes are already in foreclosure, and more than 2 million more are expected to succumb this year. Obama has long promised that his fix will go beyond the steps taken by his predecessor.

The multipart plan will for the first time commit government money to spur loan modifications. One likely component will be interest-rate subsidies for at-risk borrowers, with the government matching the servicer's rate reduction. Borrowers would have to take an affordability test to see whether they could handle the monthly payment on the reworked loan.

"Our focus will be on using the full resources of the government to help bring down mortgage payments and to reduce mortgage interest rates," Treasury Secretary Tim Geithner said last week as he announced the administration's financial stability plan.

The administration is also expected to ramp up loan modifications of borrowers in default. These modifications would lower monthly payments to more affordable terms - often 31% to 38% of gross monthly income - through reducing interest rates or lengthening the loan's term.

Several mortgage servicers, as well as mortgage financiers Fannie Mae and Freddie Mac, already have implemented loan modification programs with mixed success. The administration would likely require all banks receiving bailout money to implement such plans.

While the administration has not said much so far, industry executives and housing advocates are hoping Wednesday's announcement will contain a detailed and comprehensive fix for the foreclosure crisis. Geithner came under heavy fire last week for unveiling few specifics in the long-awaited financial stability plan, the successor to the Bush administration's $700 billion financial industry bailout.

Whatever Obama unveils Wednesday, efforts by the administration and Congress will go beyond the financial industry bailout.

On deck is controversial legislation to allow bankruptcy judges to modify loans on primary residences. The financial industry is staunchly opposed to this measure, but administration officials told them last week to expect it to happen this year.

Also, lawmakers are working to extend and amend measures enacted last year to help troubled borrowers.

The $787 billion stimulus package set to be signed into law Tuesday increases the loan limits for mortgages insured under the Federal Housing Administration, as well as those that can be bought by Fannie Mae and Freddie Mac, to as much as $729,500, up from $625,500. The higher limit, which was in effect last year, is designed to help those with larger mortgages refinance into more affordable loans and to make it easier for people to purchase homes in high-cost areas.

To spur home sales, first-time buyers will get a tax credit worth up to $8,000 on their 2008 or 2009 taxes, under the stimulus package. The credit starts to phase out for buyers who make more than $75,000 for singles or $150,000 for couples. This measure, which builds on a tax credit enacted last year, is intended to help soak up the inventory on the market, which is also depressing home values.

Congressional Democrats are also looking to fix the faltering Hope for Homeowners program, which was designed to refinance struggling borrowers into government-backed FHA loans. Few borrowers have signed up, in part because of its high fees. Lawmakers hope to make it more attractive by easing the terms and providing incentives for servicers to participate.

The House Financial Services Committee recently passed legislation taking these steps. Such a revamp was in the Senate version of the stimulus package but didn't make it into the final version.

A major problem confronting the Obama administration, however, is what to do with the rising number of foreclosures stemming from unemployment. Loan modifications don't work for these borrowers.

The only viable solution for these delinquent homeowners is to get the economy moving again so they can get jobs and catch up on their bills, experts said.

Whatever the administration chooses to do, it should implement it quickly, experts said.

Several banks, including Citigroup (C, Fortune 500) and JPMorgan Chase (JPM, Fortune 500), have agreed to put a moratorium on foreclosures until the president unveils his plan, after coming under pressure from Rep. Barney Frank, D-Mass. Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) are also holding off on foreclosures in the pool of mortgages it owns.

Still, more than 2.4 million homes are expected to succumb to foreclosure this year with as many as 9 million falling into foreclosure over the next four years, according to some estimates.

"Massive foreclosures and their contagion effects formed the epicenter of the financial crisis," said John Taylor, head of the National Community Reinvestment Coalition, who was among those meeting with the administration last week. "We need a plan that meaningfully reduces loan costs through interest rate cuts and principal loan reductions."

"The longer Treasury delays announcing substantive measures to bring financial stability to working families and communities, the longer the U.S. financial system and overall economy will suffer," he said.

A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill - the amount of witholding they paid during the year plus anything extra they had to pony up when they filed their returns - was less than that amount. But there has been a lot of confusion over this provision. Adam Billings of Knoxville, Tenn. wrote to CNNMoney.com asking:

"I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?"

The short answer? Yes, Billings would get back the $8,000 plus what he'd overpaid. The long answer? It depends. Here are three scenarios:

Scenario 1: Your final tax liability is normally $6,000. You've had taxes withheld from every paycheck and at the end of the year you've paid Uncle Sam $6,000. Since you've already paid him all you owe, you get the entire $8,000 tax credit as a refund check.

Scenario 2: Your final tax liability is $6,000, but you've overpaid by $1,000 through your payroll witholding. Normally you would get a $1,000 refund check. In this scenario, you get $9,000, the $8,000 credit plus the $1,000 you overpaid.

Scenario 3: Your final tax liability is $6,000, but you've underpaid through your payroll witholding by $1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.

To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as "first time" buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.

Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)

Applying for the credit will be easy - or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.

The housing industry is somewhat pleased with the result because the stimulus plan improves on the current $7,500 tax credit, which was passed in July and was more of a low-interest loan than an actual credit. But the industry was also disappointed that Congress did not go even further and adopt the Senate's proposal of a $15,000 non-refundable credit for all homebuyers.

"[The Senate version] would have done a lot more to turn around the housing market," said Bernard Markstein, an economist and director of forecasting for the National Association of Homebuilders (NAHB). "We have a lot of reports of people who would be coming off the fence because of it."

Even so, the $8,000 credit will bring an additional 300,000 new homebuyers into the market, according to estimates by Lawrence Yun, chief economist for the National Association of Realtors.

The credit could also create a domino effect, he said, because each first-time homebuyer sale will lead to two more trade-up transactions down the line. "I think there are many homeowners who would be trading-up but they have had no buyers for their own homes," Yun said.

Who won't benefit, according to Mark Goldman, a real estate lecturer at San Diego State University, are those first-time homebuyers struggling to come up with down payments. The credit does not help get them over that hurdle - they still have to close the sale before claiming the bonus.

One state, Missouri, is trying to get around that problem by creating a short-term loan on the tax credit of up to $6,750. The state would loan borrowers the money so they could use it at closing as part of the downpayment. Then, when the buyers receive their tax credit from the IRS, they pay back the state. Other states may follow with similar programs, according to NAHB's Dietz.

Many may look at the tax credit as a discount on the home price, according to Yun. A $100,000 purchase effectively becomes a $92,000 one. That can reassure buyers apprehensive about purchasing and then watching prices continue falling, he added.

And it provides a nice nest egg for the often-difficult early years of homeownership, when unexpected repairs and expenses often crop up. Recipients could also use the money to buy new stuff for their home - a lawnmower, a rug, a sofa - and, in that way, help stimulate the economy.

Home buyers may find big savings in locking in mortgage interest rates