If you find yourself constantly checking out Zillow listings for the perfect home, then the proposed Biden tax credit is something to keep in mind. As a first-time homebuyer, you have a lot to gain from the proposed tax credit – if it comes to fruition.
Here’s what you need to know about Biden’s proposed tax credit for first-time homebuyers.
What’s Ahead:
What is Biden’s proposed tax credit for first-time homebuyers?
First things first, what exactly is President Biden proposing?
The proposed tax credit would provide up to $15,000 for first-time homebuyers. This credit would allow buyers to access funds at the time of closing, rather than months later, as is more typical.
How does this help first-time homebuyers?
The goal of the proposed tax credit is to help potential first-time homebuyers achieve their goal of homeownership. Since homeownership is an important part of wealth building, the tax credit is designed to give families a financial boost.
Many first-time homebuyers are faced with the daunting prospect of saving for a large down payment. There are low down payment loan options out there, like the FHA and VA loans. But many potential homebuyers still struggle to build a down payment to bring their homeownership dreams to life.
With the help of this proposed tax credit, President Biden envisions helping millions of families put down roots for the first time.
When would homebuyers see the tax credit?
In the past, presidents have proposed tax credits to help first-time homebuyers. Specifically, George W. Bush and Barack Obama offered similar tax credits to first-time homebuyers of $7,500 in 2008 and $8,000 in 2009. Both of these programs expired in 2010.
These past tax credits were not immediately available to the homebuyer. With that, potential homebuyers had to come up with the funds to finalize the home purchase. After that, they could file for the tax credit at tax time – which means they usually had to wait for several months to see the money from their tax credit.
Unlike the laws of the past, Biden is proposing to allow potential homebuyers to use the credit at the time of the purchase. This could allow more homebuyers to take advantage of the program without the need to cover the full upfront costs of homeownership. Instead, they can enjoy the benefits of the tax credit at closing time without the potential delay of coming up with the funds on their own.
Potential impacts of Biden’s proposed tax credit for first-time homebuyers
Here’s how the proposed tax credit could affect you.
Help potential buyers become homeowners
If you are a first-time homebuyer that is struggling to save for a hefty down payment, this tax credit could be the financial boon you are looking for.
Imagine if you were able to claim the tax credit at the time of closing and substantially reduce the financial burden of closing costs. It could put homeownership within your reach.
Increase demand further
Mortgage interest rates are climbing up in 2023 after record-breaking lows in 2020 and 2021. Still, the increased demand for homes doesn’t seem to be going away. With the enticing cash offered through this proposed tax credit, it is possible that demand for homeownership will rise even higher.
Higher demand could lead to higher home prices throughout the market. If you are already dealing with a hot market in your area, the competition could increase even further.
Encourage the construction industry
The potential increase in demand for homeownership will likely impact the construction industry. If more buyers are actively looking for the perfect home, construction companies might step up the production of homes to meet the demand.
Is 2023 the right time for you to buy your first home?
With the proposed tax credit floating around, is 2023 the right time for you to buy a home?
Watch for this tax credit
If you are considering homeownership, then keep an eye on this proposed tax credit as it works its way through the legislative process. Whether or not the bill passes could affect your home buying plans.
Even if it does pass, the proposal might go through significant changes before passing. If or when this tax credit passes, consider how the tax credit could assist your home buying process.
Work on your credit score now
A good credit score can create a better home buying experience. Mortgage lenders are more willing to work with borrowers that have a good credit score. Plus, a good credit score can open the door to better rates and terms.
Take a minute to check your credit score. If you find that it needs a boost, here’s a step-by-step guide to improve your credit.
Boost your savings
Even with the proposed tax credit, you’ll likely need to have some savings on hand to navigate the home buying process.
Although saving for a down payment can be a challenge, there are ways to increase your savings quickly. Look for ways to cut expenses from your budget and consider a side hustle to boost your income. Both options offer a way to increase your savings as you start looking for homes.
Don’t take the leap unless you are ready
When you buy your first home, you are making a major financial and emotional commitment. No matter how you look at it – homeownership is a big step.
Even with a tax credit to help you clear the first hurdle of a down payment more easily, there are other financial challenges to homeownership. A high monthly mortgage payment or an unexpected leak could easily throw a wrench in your long-term financial plans.
Although it can be exciting to dive in headfirst, make sure to look before you leap. Consider whether or not this is the right time to buy a house. Explore the realities of homeownership before deciding if it’s the right move for you.
Read more: How do you know when you’re ready to buy a home?
Summary
President Biden’s proposed tax credit could help you become a first-time homeowner more easily. The tax credit could help you cover some of the down payment at closing.
Although this tax credit might lessen the initial financial burden, don’t close on a house without considering homeownership’s long-term costs. Make sure you are truly ready to become a homeowner before taking advantage of this tax credit – if the proposal becomes law in the near future.
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