What Does the New Tax Credit Do for You?
What does President Biden's first-time homebuyers’ tax credit mean for you?
There's been a lot of press recently about President Biden's first-time homebuyers’ tax credit. What does this tax credit mean for you? I did some digging and wanted to share with you what I found out. This is still pending legislation. That means the bill has been proposed to the House of Representatives and into committee. It hasn't been voted on yet and by the time it becomes law I'm sure it's going to change, but here's what I've been able to learn about it so far.
"This grant is going to make more people eligible for homeownership."
It would be a $25,000 grant that would be immediately available to first-time homebuyers under certain conditions. The borrowers cannot have owned a home within the last three years. Neither of the borrower's parents may have ever owned a home. These rules don't apply if the parents lost their home to foreclosure or short sale. It also doesn't apply if the borrower has ever been in foster care.
This grant is means-tested, which means that the borrowers can make no more than 120% of their area’s median income. What does that mean for us in Lancaster County? The median income for Lancaster County is $66,056, and 120% of that is $79,267. As long as your income is below $79,267 and you've never owned a home or your parents have never owned a home, you should qualify.
This grant is going to make more people eligible for homeownership. Two of the biggest restrictions for homeownership are saving for the down payment and then also saving for the closing costs. This grant would be a big boost to help more people qualify.
However, what happens when you have more buyers searching for a limited supply of homes? Prices go up. The law of supply and demand doesn't change. This bill does nothing to make more houses available. The thought is if more people want houses, builders will step up production. It doesn't work like that. High demand for homes is causing the prices of lumber, labor, and general building supplies to skyrocket.
The other thing that you need to be aware of is that these funds are going to be given out to the states based on population, median area home prices, and racial disparities of homeownership rates. I don't know exactly how we compare to the rest of the country, but we may be waiting a little while before these funds become available.
Stay tuned. I'll be following this pretty closely. If you have any questions, be sure to talk to your loan officer. You can call me at 717-220-4209 or check out parrealestateresources.com for more updates as they become available. Make it a great day.