Provision 1: First-time homeowner tax credit

There was a lot of buzz about this credit, which applies to first-time homebuyers. They get a credit of 10% of the purchase price of their house, up to $7,500, although the benefit is phased out for higher income homebuyers. People buying between April 8, 2008 and July 1, 2009 will be eligible for this one-time credit.

There are a couple of catches, of course. Depending on where you live in the country, a $7,500 credit doesn't even come close to 10% of the purchase price of a house, so the benefit isn't all that great for many people. Second, and more importantly – this is a tax credit, not a tax deduction. The money will have to be repaid to the government, starting two years after the purchase of the house. If you take the full $7,500 credit, your income tax bill will increase by $500 per year for 15 years. If you sell your house before then, you will have to pay the balance to the government.

If you're wondering about taking advantage of lower home prices and this new tax credit, check out our recent video on deciding whether to rent or buy a home in this market. Plus our handy rent or buy calculator will help you run some numbers to make the best decision.

Provision 2: Forgiveness to allow refinancing

This is a pretty important part of the bill, particularly for those whose adjustable mortgages reset at a higher rate and left them with payments they can't afford. A lot of people in that situation find they are unable to refinance to a fixed-rate loan or sell their homes because their houses have lost so much value.

This bill encourages lenders to forgive some of the debt owed to them, writing down the value of the loan to 90% of the home's current value. That would make it easier for the homeowner to find another lender to provide a 30-year fixed mortgage for the new loan balance. That loan would be insured by the FHA.

Much like the tax credit, there are a couple of hidden drawbacks here. First of all, lenders aren't required to do anything for borrowers in trouble. In fact, most of them will only go for this if they think it will be less costly than going through the foreclosure process, and they'll likely make that decision on a case by case basis. Second, not all borrowers qualify for the program. For example, you must have a loan that was issued between January 2005 and June of 2007. You must be able to prove you won't be able to keep up with your existing mortgage and you have to prove you can afford the new loan.

But let's say your lender will work with you and you get one of these new FHA backed loans. The real estate market recovers and your home value starts to rise. If you sell your house or refinance your loan, you'll have to share your home price appreciation with the FHA. At one year out, the FHA gets all of your price appreciation. The amount you have to share drops by 10% per year, but never drops below 50%, no matter how long you own your home.

Worried about foreclosure? Here are a few simple steps you can take to protect your home.

Next: Provision 3 - Permanently increase loan limits

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