It’s no mystery that the housing market is on fire right now. This housing boom — in which Sellers are receiving multiple offers on their home and buyers are sometimes paying over appraised value to compete with others — was a result of the shortages brought on by the pandemic. According to Redfin, Nearly 50% of houses bought in May were above list price. And the sale-to-list ratio has topped 100%. You might be one of the many hopeful house hunters having a hard time locating houses inside their budget. Right now the Government is working on a bill that would help first-time homebuyers with the purchase of a new home it’s called the First Time Homebuyer Act. According to Yahoo money.
What is the First Time Homebuyer Act?
U.S. Rep. Earl Blumenauer (D-OR) and Rep. Jimmy Panetta (D-CA) introduced the First Time Homebuyer Act in April 2021 to support first-time homebuyers with a tax credit.This act is known as the Biden First Time Homebuyer Act
Please note Congress has NOT passed this bill yet, and there’s much more of the ratification process to go before the bill becomes law.If passed, the First Time Homebuyer Act would create a federal tax credit equal to 10% of the purchase price first-time buyers paid for their principal residence — up to $15,000. The credit would be refundable, meaning if it lowered a buyer’s federal income tax bill to zero, they could get any remaining credit back as a refund. But if their filing status is married, filing separately, the maximum credit would be $7,500. It’s important to note that there’s a chance you’ll have to repay part or all of the down payment assistance if you don’t stay in your home (as a primary residence) for a minimum of five years. If you stop living in your home less than a year after purchasing it, you’ll have to repay the full tax credit. The repayment amount decreases by 20% every year that you live in the home, and phases out completely after five years.
This isn’t the first time a tax credit has been implemented to support first-time buyers. The 2008 Housing and Economic Recovery Act included a temporary first-time homebuyer credit, which nearly 1.5 million households claimed to get help purchasing a primary residence.
How will homebuyers receive the tax credit?
Homebuyers who participate in this program will have to wait a bit to feel the economic impact of the tax credit. Tax credits are dollar-for-dollar reductions in the amount of tax you owe.
Generally, tax credits put money in your pocket when you file your federal income tax return. The First Time Homebuyers Credit would reduce the amount of tax an eligible taxpayer owes, and possibly result in a refund if the credit reduces their tax bill to zero and there’s excess credit left over.
Who’s eligible for this tax credit?
Not all first-time homebuyers will qualify for the tax credit. To be eligible for the full tax credit, you’ll need to meet the following qualifications:
Haven’t owned or purchased a home within the past three years
Family income must be at or below 160% of your area median income
Must buy a home at or below 110% of your area’s median purchase price
As mentioned before, if you don’t live in the home for five years, you’ll have to repay part or all of the first-time homebuyer tax credit.
What about Biden’s $25,000 homebuyer grant?
You may also hear a lot of buzz surrounding The Down payment Toward Equity Act of 2021, which is a grant program that provides up to $20,000 in down payment assistance to first-generation homebuyers. If you qualify as a “socially and economically disadvantaged individual,” you may receive up to $25,000.
Like the First Time Homebuyer Credit, the homebuyer grant isn’t yet available; it’s still in discussion in Congress.
In its current draft, the grant bill requires applicants to meet the following eligibility requirements:
Complete homebuyer counseling or alternative homebuyer education
Be a first-time homebuyer
Be a first-generation homebuyer whose parents or guardians don’t currently own a home in any state, and whose spouse or any other household members haven’t owned a home within the past three years
A buyer who was placed in foster care qualifies as a first-generation homebuyer
Have an income at or below 120% of the area median income where the home is located or where your current place of residence is located
For a home in a high-cost area, have an income at or below 180% of the area median income where the home is located
All of this information is subject to change since the First Time Homebuyer Act hasn’t yet been passed, it’s an exciting prospect for homebuyers who are looking to make their first home more affordable. I will make sure to post more on this as information becomes available.