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Is Biden’s First Time Homebuyer Act For You

Biden First Time Homebuyer Act

The Biden first-time homebuyer act seeks to alleviate the cost of home buying by first-timers through offering tax credits. It first came to life as a campaign promise by the current United States president, Joe Biden; thus the name.

It’s currently a bill awaiting ratification by Congress, and hopefully, it’s going to stand. But while it’s still pending approval, the fuss around it can make it not very clear to understand. This article provides insight into the Biden first-time home buyer act and what it entails.

First Time Homebuyer Act

What is the Biden First Time Homebuyer Act?

The Act was first introduced by U.S. Reps Jimmy Panetta and Earl Blumenauer and sought to alleviate the burden of first-time homeownership. Given the rising home prices and sales in the country, it’s become incredibly challenging for first-time buyers to own a home.

Part of the reason is that real estate investments across the States have declined in the past few years. However, it’s only a drafted bill that Congress has yet to pass and is bound to be fruitful sooner.

It primarily targets the middle and low-income first-timers and will create a non-refundable tax credit reaching up to 10 percent of the home-buying costs. That would amount to up to $15,000 of the total price of a home purchase by any first-time homeowner.

This Act builds on the temporary tax credit in the 2008 Housing and Economic Recovery Act. However, it seeks to go the extra distance of providing a long-standing solution to offset home-buying costs.

What is the Downpayment Toward Equity Act of 2021?

Like the Biden first-time home buying act, this too is a proposed bill that’s pending approval by Congress. However, it seems to work things out differently by offering grants reaching up to $25,000 instead of tax credits.

The grants would be available through the U.S Department of Housing and Urban Development and tags along with some income requirements.

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How Does It Work, And How Different Is It From The Downpayment Toward Equity Act of 2021

As posted in GOVINFO.gov  On July 16, 2021, Ms. Waters (for herself, Mr. Green of Texas, Ms. Pressley, Mr. García of Illinois, Ms. Garcia of Texas, Mrs. Axne, Mr. Cleaver, Ms. Velázquez, Mr. Lawson of Florida, Ms. Ocasio-Cortez, Ms. Tlaib, Mr. Torres of New York, Ms. Williams of Georgia, Mr. Auchincloss, Mr. Lieu, Ms. Lee of California, Mr. Sires, Ms. Clarke of New York, Mr. Evans, Mr. Espaillat, Ms. Moore of Wisconsin, Mr. Blumenauer, Ms. Norton, Mr. Bowman, Ms. Ross, Ms. Schakowsky, Ms. Sánchez, and Mr. Vicente Gonzalez of Texas) introduced the Downpayment Toward Equity Act Of 2021 bill; which was referred to the Committee on Financial Services.  Read More Here

First Time Homebuyers Act

The Biden First Time homebuyer act doesn’t offer cash grants, unlike the Downpayment Toward Equity Act of 2021. It seeks to bolster homeownership without imposing pay-back demands on homeowners who get the tax credits. Read More Here

There’s no definite plan to process and acquire the tax credit, but it shows similar shades to previously related acts. That includes the 2008 Housing and Economic Recovery Act’s acquisition processes whose blueprint appears identical.

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Seemingly, the principles for both Acts vary, but they somehow work towards one focused goal. That includes providing homeownership relief amid a real estate tumult surrounding home buying and selling.

It’s apparent that numerous underlying issues play a colossal part in creating the hurdles, and both acts work together to bring them down. However, the Biden first-time home buyer act primarily seeks to provide home purchase assistance to first-timers with no pay-back demands.

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Eligibility For The First Time Homebuyer Act

The eligibility terms are subject to change periodically as it awaits ratification by the state legislatures and approval by Congress. However, there’s already a laid set of terms dictating the eligibility. A potential first-time homeowner must meet the following requirements.

First Time Homebuyers Act

First-Time Homeownership

Of course, being a first-time homebuyer eligible for the Act’s tax credit is a no-brainer. Eligible homebuyers must not have been co-signer for a mortgage loan within 36 months, including second homes, vacation rentals, or primary residences.

Besides, a potential home buyer must not have owned a home in the past. That entails purchasing or acquiring it from a relative or a company they work for.

Earning A Modest Income As Per Household Size And Location

A home buyer must not earn more than 160%  of their area’s median income. Earning more than that they may not qualify for the tax credit. It implies that first-time buyers earning less are automatically eligible upon meeting other eligibility requirements.

Eligibility income requirements may differ in higher or lower median areas.

For instance, according to the AMI report, the median income in Detroit, Michigan, as of 2021 is $50,240. That means an eligible owner shouldn’t earn more than $80,384 to qualify for the tax credits.

You can find your state HERE.

Be Of Legal Age

The Act takes care of the abnormalities that tag along with providing the credit. Therefore, a typically eligible buyer must be 18 years of age or older on the date of processing the purchase transaction.

Some potential buyers may use a child’s name to process home cash purchases, which the Act is against.

No Purchases From A Relative Or Family Member

A potential first-time homeowner shouldn’t be purchasing a home from a relative or family to qualify. That includes siblings, parents, cousins, grandparents, and even in-laws, among others. However, more developments on this eligibility term are bound to ensue as the bill goes under constant modification.

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 Potential Downsides To The First Time Homebuyer Act

While the Biden first-time home buyer act seems to assist homeownership, potential downsides cast a shadow on the real estate domain. Numerous housing experts and lawmakers argue that the Act only exacerbates the housing affordability issue, making it worse than it already is.

The federal government’s liquidity to first-time homebuyers could potentially inflate house prices, making it costlier than before.

Besides, the issue of housing availability is a cause of concern and has been for decades. It could render the credit useless if there are no houses available to purchase, or least to say, affordable houses to buy.

According to New York Times, in February 2021, the average number of homes for sale in the United States has plummeted drastically. The figures now estimate marginally below 500,000 in 2021, a drastic decrease from almost 1,500,000 in 2015.

First Time Homebuyer Act

Will This Bill Ever Get Pass

The bill doesn’t have Bi-Partisan support in the House and it is very unlikely to exit the house and into the Senate as it is now written. It is very doubtful that this bill or the Downpayment Toward Equity Act of 2021 bill will ever be passed.

So, it really doesn’t look like there will be any immediate assistance to first time homebuyers in the very near future.

Conclusion

First-time home buyers seemingly have a chance to own homes, thanks to the legislative bill drafted to provide tax credits. However, the bill’s fate lies with whether Congress will ratify it into a long-standing law for the first generation of first-time homeowners.

Any citizen eligible for the credit will automatically qualify without requiring an application, and the IRS will credit the tax bill immediately. The glad tiding is that the tax credit is available for all sorts of homes.

And therefore, that means every eligible individual has a possible chance to put it in the bag.

End: Is Biden’s First Time Homebuyer Act For You

Disclaimer: This article is meant for educational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice.

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