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Is federal relief on the way for home buyers? Maybe. Read on to learn more. [[{“value”:”
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In 2020 and 2021, mortgage lenders started offering up some of the lowest interest rates in history in response to the COVID-19 pandemic and the economic crisis it fueled. But mortgages have been a lot more expensive to sign over the past couple of years. And between higher interest rates and home prices, many buyers — particularly first-timers — have had a difficult time breaking into the housing market.
President Joe Biden acknowledged the hardships first-time buyers are experiencing in his recent State of the Union address. And he made a point to inform those listening that he has a plan that could really help.
Is a new home buyer tax credit in the works?
In 2008, a first-time home buyer credit was made available in response to the housing crisis that ensued at that time. These days, there are no official first-time home buyer tax credits on the books. But that could change.
During his 2024 State of the Union address, President Biden said, “I know the cost of housing is so important to you. Inflation keeps coming down. Mortgage rates will come down as well, and the Fed acknowledges that.”
“But I’m not waiting. I want to provide an annual tax credit that will give Americans $400 a month for the next two years as mortgage rates come down to put toward their mortgages when they buy their first home or trade up for a little more space.”
Now to be clear, Biden’s proposal is simply that — a proposal. But such a move could do a world of good for buyers and help open up an otherwise tight market.
A big reason so many buyers have struggled to purchase a home lately is that inventory is low. And inventory is stagnant largely because existing homeowners don’t want to give up the record-low mortgage rates they locked in a few years ago.
Biden’s proposal could serve two very important purposes. First, it could help first-time buyers get into the market. But also, Biden’s language implies that his credit wouldn’t just be earmarked for first-timers. Rather, it would potentially include existing homeowners who wish to upsize.
That’s huge, because if more people are able to afford to upsize, it could open up the supply of starter homes on the market. These are the types of properties first-time buyers tend to target, since they tend to be smaller (meaning, often easier to maintain) and less expensive by nature.
Assistance may already be available to you
Although there’s currently no tax credit available for first-time home buyers, if you’re purchasing your first home, you may be eligible for a down payment assistance program through your state or local housing authority. New York City’s HomeFirst Down Payment Assistance Program, for example, provides qualified home buyers with up to $100,000 toward a home purchase.
You may also be able to qualify for a down payment assistance loan. Eligibility for these programs is determined by your income and credit history, and it can vary based on where you live.
With any luck, President Biden will be successful in providing meaningful relief to first-time (and existing) home buyers and homeowners. It could really help at a time when the housing market is particularly tough to crack.
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