Written by Dan Green
Dan Green
Dan Green (NMLS 227607) is a licensed mortgage professional who has helped millions of people achieve their American Dream of homeownership. Dan has developed dozens of tools, written thousands of mortgage articles, and recorded hundreds of educational videos. Read more about Dan Green.
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This article was checked for accuracy as of November 4, 2024. Learn more about our commitments to accuracy and your mortgage education in our editorial guidelines.
Updated: November 4, 2024
This article provides information about First-Time Home Buyer Mortgage Relief Credit, a proposed bill that has not yet been passed into law. Please note that details are subject to change as the legislative process continues.
The $10,000 First-Time Home Buyer Mortgage Relief Credit is a housing bill introduced by President Biden in his State of the Union Address on March 7, 2024.
The proposed bill, which gives first-time home buyers $10,000 in tax credits in two $5,000 annual installments, is proposed as a mortgage relief credit to Americans.
At today’s mortgage rates, the $10,000 tax credit has the same effect as a mortgage lender giving home buyers a 150 basis point discount off their mortgage rate.
The $10,000 First-Time Home Buyer Mortgage Relief Credit program is mortgage relief for low- and middle-income households. The program gives eligible buyers $5,000 a year in tax credits for their first two years of homeownership.
Tax credit money can be used for any purpose.
The $10,000 tax credit program is expected to resemble the $15,000 First-Time Homebuyer Act introduced in 2021, based on the successful Obama-era $8,000 tax credit for first-time buyers.
To qualify for the proposed program, home buyers must meet the following eligibility standards:
The Biden $10,000 mortgage relief tax credit is expected to help 3 million first-time home buyers. Here’s how:
The program provides tax credits of up to $5,000 annually, which offsets the monthly PITI on a home.
President Biden’s State of the Union address also included a proposal that gives first-time home buyers and other occupying home buyers an advantage over real estate investors, including corporate home buyers.
The proposed Home Seller Tax Credit gives a one-time $10,000 tax credit to homeowners who sell their homes to future owner-occupants. Sellers who sell their homes to real estate investors cannot claim the credit.
Sellers must also meet the following eligibility requirements to qualify:
Furthermore, the home for sale must be a starter home, defined as a home that sells for less than the county’s median home price. Eligible property types include single-family homes, condominiums, townhomes, multi-unit homes, and any other home zoned for residential residence.
The bill will increase available housing inventory for homes selling between $100,000-250,000 which, according to the National Association of REALTORS® Existing Home Sales report, is the fastest-selling segment of U.S. homes.
President Biden also used his State of the Union speech to call on Congress to pass the Downpayment Toward Equity Act, a downpayment assistance program for first-generation home buyers that gives up to $25,000 in cash grants.
The bill was originally introduced in the 2021-2022 Congress, then re-introduced in 2023. It currently has 44 co-sponsors in the House of Representatives. A corresponding bill is expected to be introduced in the Senate soon.
Read our helpful review of the Downpayment Toward Equity Act for more information.
The President’s State of the Union speech acknowledged that, although Congress can lower housing and homeownership costs for first-time home buyers and address the shortage of affordable homes nationwide, work can be done beyond Capitol Hill as well.
For instance, the Federal Housing Administration lowered mortgage insurance premiums for all new FHA loans last year, saving homeowners an estimated $800 annually. Despite the reduction, the FHA’s cash reserves expanded, and it now holds 5 times its required amount.
The FHA can take a second action and reduce its mortgage insurance rates in 2024 to help keep homes affordable.
As another example, President Biden called on the Federal Home Loan Banks to double their annual contribution to the Affordable Housing Program, which, in part, makes first-time home buyer grants and other home-buying programs possible.
The President also called on mortgage lenders and title companies to reduce fees that raise the cost of homeownership and homeownership opportunities, including anti-competitive insurance policies that cut into a home buyer’s down payment size and reduce their available equity.
Until the $10,000 First-Time Home Buyer Mortgage Relief Tax Credit is drafted into a bill, we can make educated guesses on program requirements based on similar first-time home buyer bills with Congress, including the $15,000 Homebuyer Tax Credit Act and the 2009 Obama Tax Credit, which more than 2.6 million renters used to buy their first home.
Eligible home buyers may not have owned a home or been a co-signer on a mortgage loan within the last thirty-six months, encompassing primary residences, second homes, and vacation rentals. Buyers who owned a home more than thirty-six months ago and home buyers who own commercial properties through a business remain eligible.
Eligible home buyers may use their tax credit once only. Suppose you claim your federal tax credit under the First-Time Homebuyer Act in 2024, for example. In that case, you may not claim the credit again.
Eligible home buyers must earn an income within 160 percent of the area’s median income. For example, in Columbus, Ohio, where the median income is $60,000, eligible home buyers who file as single earners must have a household income of less than $96,000 annually.
Households with multiple income earners have higher income limits.
Eligible home buyers must be 18 years of age on the date of purchase or married to a person at least 18 years of age. This rule prevents adults from buying a home with cash in a child’s name, then claiming the tax credit on the child’s income tax returns.
Eligible home buyers must be making an arms-length transaction. They may not purchase their home from a relative, including a spouse, parent, child, aunt, uncle, cousin, or grandparent. The bill provides no specific guidance regarding purchasing a home from an entity controlled by a relative, such as a trust.
The Biden program for first-time home buyers is a tax refund from the U.S. Treasury. It’s paid to eligible first-time home buyers when the IRS processes their federal taxes.
The credit is expected to be paid in two $5,000 installments in consecutive years so long as the homeowner continues to own the home and make it their primary residence.
It’s not yet known whether the bill’s tax credit will adjust for inflation.
Married households who file their taxes separately may claim half of the available credit, and non-married buyers may claim their proportional share of the credit.
Buyers who change their primary residence or sell their home within four years of purchase may realize a tax liability for moving out.
The $10,000 First-Time Home Buyer Tax Credit is among the more likely first-time home buyer programs to pass into law for two reasons:
During its last election cycle, the Biden Administration pledged to make homes more affordable, increase wages among low-earning households, and reduce wealth gaps due to race. This First-Time Home Buyer Tax Credit bill meets all three criteria.
With congressional approval, the $10,000 first-time home buyer tax credit program will be available in 2024.
As of November 20, 2024, the $10,000 First-Time Homebuyer Act is not passed.
No, the $10,000 first-time homebuyer tax credit is not yet available. We expect the bill to pass into law in some form before the end of the year.
Eligible first-time home buyers aren’t required to apply for the $10,000 first-time home buyer tax credit. When you meet the program’s eligibility requirements, the IRS credits your tax bill automatically.
If you move or sell your home within four years of using the program, you must pay back at least some of your tax credit. There are exceptions for death and military transfers.
Yes, you can claim the first-time home buyer tax credit if you purchase a home with a non-relative and only one of you is a first-time buyer. In this example, the credit reduces by 50%, and the first-time home buyer claims $2,500 on their tax returns per year.
When you buy a home and claim the $10,000 first-time home buyer tax credit, the tax credit’s effective date is the date of closing.
The first-time buyer program works for any home zoned for residential property, including trailer homes, mobile homes, and manufactured homes.
Use this chart to find the median income for an area, then multiply that number by 1.6. Your income is eligible if your household income is less than or equal to the product.
Yes, you can use your first-time home buyer tax credit to purchase a multi-unit home if one of the units is your primary residence.
This article, "The Biden $10,000 First-Time Home Buyer Mortgage Relief Credit," authored by Dan Green, is based on extensive professional mortgage experience and includes references to trusted sources such as industry-leading financial institutions and expert research from the following websites:
This article was last updated on November 4, 2024.
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