Video Transcript
The Biden First-Time Home Buyer Tax Credit
– it’s $10,000 for first-time buyers – what is it and how do you get it? Here we go. [Make your dogs bark] I’m Dan with Homebuyer.com.
We are the mortgage company for first time
home buyers. Let’s jump right in on the $10,000 First-Time
Home Buyer Tax Credit – introduced by President Biden at his 2024 State of the Union Address. The proposal would give $10,000 – to eligible
first-time home buyers – and it’s being pitched as a mortgage relief program – a tax credit
that offsets today’s mortgage interest rates – which are higher than what they were two,
three, and four years ago – before – during – and after the pandemic – which has strained
household budgets – and made it more difficult for everyday people to achieve their American
Dream of Homeownership.
Homeownership confers a lot of benefits to
homeowners – but chief among them – is wealth-building and safety and security. The President’s plan reduces barriers to entry
for the first-time home buyer segment which – over the near and long-term – decades – over
generations – make new economic and social opportunities possible for every American
included. This video has three parts we’ll cover.
The first is about the tax credit. The second is who can claim the tax credit. And – in the third section – we’ll talk about
other first-time buyer programs President Biden introduced in his address.
Skip ahead – roll back – do what you need. This is a fast-paced review – and – we have
an accompanying article with additional details on the Homebuyer.com website. That link is pinned to the first comment.
About the tax credit. First – it’s being billed as a mortgage relief
credit – which is interesting because there is no accompanying bill in Congress just yet
– so this language – calling it a mortgage relief credit – hints at how the White House
intends to win over a divided Congress. Call it a tax credit – and you get an argument.
Call it mortgage relief – and – well – that’s
a different idea. And it’s how the bill was pitched in the speech. As relief against rising mortgage rates.
$10,000 worth – as an offset, paid as two
annual credits of $5,000 each – which has the same effect of getting a mortgage rate
one-and-a-half percentage points below today’s rates. A direct offset against the cost of today’s
mortgage rates. A home affordability tool to make owning a
home and paying for it easier for everyday buyers.
That’s smart. The bill doesn’t lower mortgage eligibility
standards – or widen the credit box – like what led to a crash 20 years ago – as immortalized
in The Big Short. It just takes today’s first-time home buyers
– and gives them cash – to bring owning a home more within reach.
We’re short on details so far because the
$10,000 tax credit is not yet codified into law or written as a bill but we can expect
the program to work like its predecessor – the first-time home buyer tax credit of 2009 – the
Obama-era program that helped created more than 4 million new homeowners – and – to be
written like the President’s last bill that wanted to make homeownership more affordable
– last session’s First-Time Homebuyer Tax Act. That bill offered $15,000 in tax credit to
first-time buyers but ultimately died in Congress – and – it happened to be one of the few key
White House initiatives that didn’t get passed in the President’s first term. The CHIPS and Science Act passed.
The Infrastructure and Jobs Act passed. The PACT Act passed. All of them.
The First-Time Home Buyer Tax Credit, though,
did not, and home affordability – and lifting up overlooked and underserved Americans – that’s
a part of this administration’s unfinished business – which it’s up-front about. Creating better paths to homeownership is
the last remaining promise from the last campaign trail – and a key theme for the current one. So here’s how we think the $10,000 First-Time
Home Buyer Tax Credit will work – based on how the prior version would have worked – and
our experience with other first-time home buyer programs.
The key is to keep the bill simple. – to help it sail through Congress. And that’s what the Biden First-Time Buyer
Credit will do.
It will piggyback on U.S. tax code language
introduced in 2008 – as part of The Housing and Recovery Act – so lawmakers can spend
less time on how to write the rules – and more time on how to get the bill out to the
people. So to qualify – you must be a first-time buyer
– buying a home as your main residence – and also – you must earn an income that is no
more than 60 percent higher than the median income household for your area – which – if
we apply the Paredo Principle – the 80/20 rule – roughly – it means that – unless you
are in the Top 11 percent income-earners for the area – you’ll be eligible for the first-time
buyer credit.
Now – there will likely be stipulations and
some limitations – like the credit being limited to 10 percent of your purchase price. So, if you buy a home for $100,000 or more,
you get the full credit – because – 10 percent of $100,000 is $10,000. the purchase price.
But, if you buy a home for $70,000, your credit
would max at $7,000, which is 10 percent on what you bought. Second – the credit is expected to be refundable
– which means the government can take your credit back – if you move or change your primary
residence within four years of moving in. Each year you stay – you get to keep one-fourth
of your overall credit so – if you move in year one – you pay back 75 percent of what
you received.
Move in year two – you pay back 50 percent. Year three – you pay back a quarter. And, after four years of making the home your
main residence – no repayment is due.
There are some exceptions here – for death,
divorce, military transfers – but most people – plan on staying at least four years. Third – to use the program – you must be at
least 18 years of age – this is a clause to protect against fraud – so children aren’t
used as straw buyers or worse. And – you must be buying your home from a
non-relative – non-arm’s length transaction are not allowed – so sales among relatives
– between parents and children – from spouse to spouse – from real estate agents to clients
– they’re disallowed if you want to claim that credit.
And speaking of claiming the credit – expect
it to be automatic. No application to file. No paperwork to send in.
No approval process from your lender or the
government. When you buy a home and meet the rules, you
check a box on your tax returns that says you bought a home – you sign an affidavit
– and your credit payments begin – no extra work – no extra effort. Now – before the bill passes – there are some
open questions.
For example – prior versions of a first-time
home buyer tax credit had a retroactive start date – so every first-time buyer could get
the benefit – not just the ones who bought after the bill passed. I expect we’ll see something similar here
– tied to the theme of mortgage relief credit – with an effective that retroactive to coincide
with when mortgage rates really started rising. That could take a us back to January 1, 2023
for a start date.
Maybe mid-year 2022 – we don’t know. But we’ll watch for it. Also – we don’t know whether the bill will
apply to homes purchased with cash – which prior versions of the bill allowed.
Again – this may be part of the reason the
bill is being positioned as mortgage relief credit and not a tax credit – because the
aim is to give people who need it – a helping hand into homeownership. Now – moving into our last section here – let’s
kinda do a walk-through of all the other big items in housing the President brought up
in his address. Each of them are – again – meant to help every
American who wants to own a home – have an easier path of getting into homeownership.
Rules to get approved aren’t being relaxed
– guidelines aren’t changing – this isn’t about giving everyone a home because they
deserve it. It’s about reducing barriers to homeownership. To create a level playing field – and that
makes one particular proposal super interesting – and that’s a bill to give $10,000 tax credit
to home sellers who sell their home to a person – and not a corporation – or investor – but
to a person – who will move in and make the home their primary place of residence.
The bill would apply to owner-occupant home
sellers – and for homes that sell at or below the median home price for a county – and this
simple shift could make up to 3 million additional homes available for first-time buyers at a
time when home inventory sits near all-time lows – and – when homes in the $100,000 to
$250,000 price range sell up to 25 percent faster than homes in other price buckets. This would be good. The President also renewed calls on Congress
to pass the $25,000 Downpayment Toward Equity Act into law – which would give first-time
first-generation home buyers a cash grant to put toward the purchase of home and any
of the line-item costs linked to it – including a mortgage down payment.
This bill is active with more than 40 co-sponsors
currently – we got a write-up on it on our site at Homebuyer.com – I’ll add a link in
the description. Also, as sort of a speed round: The President
announced calls to lower junk costs that take money away from a buyer’s down payment and
equity positions including anti-competitive fees in mortgages and reductions in title
insurance premiums – which are grossly imbalanced in favor of insurers – tax incentives for
builders to increase the national stock of homes – a doubling of cash grants offered
through the Federal Home Loan Bank system – a potential reduction in FHA mortgage insurance
premiums for the second time in two years – so much – but the main idea – is that White
House remains committed to finishing its work in creating homeownership opportunities for
people who want homeownership. Some of the work will require Congress to
step in – like with the $10,000 tax credit – and other work can be handled by housing-related
agencies.
We’ll keep it up-to-date here on the channel. Subscribe to make sure you always know the
latest. [OUTRO] Remember you don’t need to wait for these
bills to pass to take advantage of everything we have to offer.
Get today’s mortgage rates and our immediate
mortgage approval on the site – in as little as 3 minutes – with no paperwork. I’m Dan with Homebuyer.com, the mortgage company
for first-time buyers. Happy homebuying.
