Don’t get your hopes up about saving through a first-time homebuyer tax credit. Those expired way back in 2010. Even though, there’s some hope for you, since there’s been talk in Congress about bringing them back, but so far, it’s all just bills and no new programs have actually been created.
The first-time homebuyer tax credit, which offered a tax credit of up to $8,000 for homebuyers who met certain requirements, expired almost 14 years ago. Since then, several bills have been introduced in Congress to reinstate the tax rebates, but none have been approved. The latest proposal, the First-Time Housing Assistance Act, was introduced by Senator Marco Rubio (R-FL) in October 2022.
Are There Any Tax Credits for Home Buyers?
As of the latest update, the status of the first-time home buyer tax credit remains uncertain. Meanwhile, prospective homebuyers may wonder about the alternative options available to them. This includes exploring other potential tax breaks, investigating down payment assistance programs, and staying informed about the various loans currently accessible to first-time buyers.
First-time homebuyers looking for a tax credit might want to consider other options, such as a Home Loan Protection Program (FHA) loan or a Middle-Income Family Home Loan (MFH) loan. These programs offer a variety of benefits for first-time home buyers, including:
- Lower interest rates than conventional loans.
- Lower down payment requirements.
- Help with closing costs.
Federal Housing Administration (FHA) loans are government-backed mortgages aimed at making homeownership more accessible for a wider range of borrowers, especially those with lower credit scores or smaller down payments. Here’s the breakdown:
The U.S. Department of Housing and Urban Development (HUD) insures these loans, meaning they cover part of the lender’s risk if the borrower defaults. This makes lenders more willing to offer them with less stringent requirements compared to traditional mortgages.
Benefits for borrowers:
- Lower down payments: Typically, you only need 3.5% down compared to the usual 20% for conventional loans. This can be a huge saving for first-time buyers or those with limited funds.
- More flexible credit requirements: Borrowers with credit scores as low as 580 may qualify for an FHA loan, whereas conventional loans might require scores closer to 700.
- Lower closing costs: Some FHA loans allow for the seller to contribute towards closing costs, making the overall purchase more affordable.
What to Consider When Applying for FHA Loans
- Mortgage insurance premium (MIP): Borrowers pay an upfront and monthly MIP to compensate for the government’s insurance. This adds to the total cost of the loan.
- Loan limits: There are loan limits for FHA loans depending on the location and number of units in the property. These limits are generally higher than conventional loans, but may not be enough for high-cost areas.
- Processing times: FHA loans can sometimes take longer to process than conventional loans due to the additional paperwork and government approval process.
Are First-Time Home Buyer Tax Credits Coming Back?
For over a decade, the federal government has deferred the creation of a new first-time home buyer tax credit. Despite repeated hints from President Joe Biden and Congress, a tangible renewal of this tax break, even in 2023, remains impalpable.
Contrary to circulating reports, any claim of a first-time home buyer tax credit progressing through Congress is unfounded. The notion of a refundable tax credit hasn’t advanced beyond the conceptual stage and is yet to reach consideration by a legislative committee. Yeah, I know, it’s sad that none of the ideas got to get approved
Several attempts at implementing tax credits and grants for first-time home buyers have fallen short, including:
- The Biden $15,000 First-Time Homebuyer Tax Credit: Proposed during Joe Biden’s 2020 campaign but never enacted. While the President has recently proposed a $10 billion down payment assistance plan, there’s been no mention of resurrecting the tax credit initiative.
- The Uplifting First-Time Homebuyers Act of 2023: Filed in the House in February 2023.
- The DASH Act: Introduced in the Senate in March 2023, standing for the “Decent, Affordable, Safe Housing for All Act.”
- The Downpayment Toward Equity Act of 2023: Presented before the House in June 2023.
- The Housing Crisis Response Act of 2023: Introduced in June before the 118th Congress, with 33 cosponsors.
- The LIFT Homebuyers Act of 2023: Put forth in both the House and U.S. Senate in July 2023.
Despite these initiatives, none have progressed beyond the initial step of presenting a bill and are far from being enacted into law. The journey for any bill involves navigating through House or Senate committees before potentially reaching the floor for a vote, and thus far, none have achieved that milestone. The landscape remains uncertain, urging potential homebuyers to stay vigilant for updates that may influence their financial decisions.