For some, buying your first home can be an expensive challenge. Fortunately, some cities and states have special programs in place to help new buyers purchase their first home.
Now, a new bill recently introduced in Congress may help new buyers purchase their first home with federal tax credits. Keep reading to learn more about the First-Time Homebuyer Act.
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Some in Congress want to give a $15,000 tax credit to first-time home buyers
U.S. Rep. Earl Blumenauer of Oregon and Rep. Jimmy Panetta of California introduced the First-Time Homebuyer Act last week. Aimed at low and middle class earners, it seeks to provide a tax credit to qualifying first-time home buyers. The refundable tax credit offered would be up to 10% of the purchase price, for a maximum amount of $15,000. This is similar to a tax credit President Joe Biden originally proposed.
To qualify for the program, participants must make no more than 160% of the area median income. Additionally, participants must not spend more than 110% of the area median purchase price. Taxpayers would also have the option to treat the purchase of their home as occurring in the prior taxable year. This would allow them to receive the credit sooner.
To be eligible for the full credit, individuals must not have owned or purchased a home within the past three years. Borrowers would have the ability to claim the credit for primary residences purchased after December 31, 2020. Borrowers also need to use the home as a primary residence and live there for at least four years. Otherwise, they will need to pay taxes to cover a portion of the credit they received.
The First-Time Homebuyer Act is not yet a reality
Due to the significant expense, homeownership is out of reach for many individuals and families. This tax credit could make the financial hurdle less steep for many. But before that happens, we will have to wait and see how the First-Time Homebuyer Act fares in Congress.
At this point, it is still a bill and would first need to pass the House before moving on to the Senate.
The current home market proves challenging for buyers
It’s not easy to buy a home in today’s housing market, and the market favors sellers. Current housing inventory is low, meaning many people are fighting for a limited number of homes. That also means that potential buyers may end up in bidding wars when making offers. Getting the home of your dreams and buying a home at your preferred budget could be very difficult.
If this first-time home buyer tax credit would pass or if similar legislation would be enacted, it could eventually be a lot easier for more people to make their homeownership dreams come true.
To learn more about the home-buying process, or if you want to explore current mortgage rates, check out our mortgage resources.
View more information: https://www.fool.com/the-ascent/mortgages/articles/new-bill-would-give-first-time-home-buyers-up-to-15000-in-tax-credits/