What is the Proposed First-Time Homebuyer Tax Credit?
A new bill in Congress could help open the door for new homeowners.
It's no secret that many first-time homebuyers are having a tough time out there right now. It's not just high prices—there are a host of factors fueling a crazy market making a home purchase more difficult.
According to the National Association of Realtors, in June 2021 first-time buyers represented 31 percent of sales, down from 35 percent last year. Houses are being taken off the market faster, and all-cash sales have increased to account for 23 percent of all transactions. And a whopping 89 percent of homes on the market sold in less than a month—just 17 days on average. Perhaps one of the most important factors is the low inventory of available homes, one of the lowest in recent history, which is driving demand sky-high.
What's a first-time buyer to do? Many may decide to give up or wait it out if and when inventory levels creep back up and prices level out. But there's new legislation in the works that offers hope and assistance for new buyers: the First-Time Homebuyer Act.
What is the First-Time Homebuyer Act?
If this piece of legislation becomes law, it would establish a refundable tax credit of 10 percent of a home's purchase price, up to $15,000.
The legislation is based on a campaign platform from President Joe Biden to incentivize homeownership and assist buyers in overcoming financial barriers to homeownership.
Who is eligible for the First-Time Homebuyer Credit?
To be eligible, the prospective buyer must:
- Be a first-time buyer or not have owned or purchased a home in the past three years
- Have income at or below 160 percent of their area's median income
- Must purchase a primary home, not rental or second home
- Be purchasing a home at or below 110 percent of their area's median purchase price
If you or your spouse have owned a home in the past, there are some exceptions that allow someone to qualify as a first-time buyer:
- An individual who has never owned a principal residence even if their spouse was a homeowner
- Anyone who is a single parent who owned a home with their ex-spouse
- A displaced homemaker who only owned property with their spouse
- A person who only owned property that wasn't in compliance with and cannot be brought into compliance with local or state building codes without constructing a new permanent structure
How does the First-Time Homebuyer Tax Credit Will Work?
If passed into law, eligible first-time homebuyers would automatically receive a tax credit when they file their taxes for that year with no action needed beyond the filing of a tax form. A tax credit is an amount of money that people are permitted to subtract, dollar for dollar, from the income taxes that they owe and, for homeowners whose tax bill is less than $15,000, the extra amount would be paid via direct deposit.
The First-Time Homebuyer Act could provide significant new opportunities for those dreaming of a home of their own; until then, your mortgage loan officer can help you navigate other existing programs for aspiring homeowners.
At Lennar Mortgage our mission is to help our customers become empowered homeowners, even those who think they may not be able to afford their dream house or buy their first home. If you are a first-time buyer or have questions about programs that can assist you in purchasing your first home, we're here to help—talk to one of our loan officers near you today.