Among President Joe Biden’s campaign proposals was a $15,000 incentive for first-time homebuyers seeking to achieve the American Dream.
His Democratic party allies are taking that proposal and running with it. Lawmakers have introduced two bills that could result in as much as $25,000 in down-payment assistance and a new tax credit of up to $15,000.
So if you’re still waiting on the sidelines of the housing market, these new proposals could provide the help you need to get in the game while mortgage rates are still among the lowest in history.
Boost your down payment with help from Uncle Sam
One of the bills, "The Downpayment Toward Equity Act of 2021," would create a grant program allowing states to provide first-timers with cash for down payments, closing costs or fees that result in lower mortgage rates.
Malcom Glenn, spokesman for the online mortgage lender Better, tells MoneyWise that if enacted in its current form, the legislation would make 10% of the nation’s renters — about 4.37 million people — eligible for down-payment assistance.
To qualify, individuals must meet income requirements and be "first-generation" homebuyers, meaning anyone who has either never owned their own home or who owned a home once but lost it due to financial distress, including foreclosure.
The bill, introduced in April, provides eligible homebuyers with up to $20,000 in assistance or as much as $25,000 if the buyer qualifies as socially or economically disadvantaged.
An earlier draft of the proposal provided up to $15,000 in down-payment assistance, the amount Biden originally pitched. For most Americans, that’s a substantial amount of money. It would take the typical renter 14 years to save a down payment of that size, based on calculations from Moody’s Analytics.
The amount you’ll be required to pay back depends on how long you own your first home. If for some reason you aren’t living in it within a year of purchase, you’ll have to reimburse the full amount the government floated you.
Otherwise, the amount you’re required to pay back falls by 20% every year. Occupy your home for five years and you, and the program, can go your separate ways.
If the bill passes and you start home shopping, one important step will be making sure your credit score is as high as possible. The lower your score, the higher the mortgage rate you’ll be asked to pay, so check your credit score for free and work on strengthening it before you apply for a loan.
Get a lower tax bill — or money back
The second bill, also introduced in April and named the “First-Time Homebuyer Act,” would provide a tax credit of up to 10% of a home’s purchase price — or as much as $15,000 — to first-timers.