With all the talk about President Joe Biden’s proposed $15K First Time Homebuyer Tax Credit, you may think that there’s no way for you to get in on the action. But, other programs might help you buy your first home. One of these is called the Down payment Toward Equity Act.
This program helps qualifying buyers make their down payment by providing funds from a government agency to go towards their home’s purchase price. Here’s what you should know about these two bills and how they can help you buy your first home:
What Is Bidens First Time Home Buyer Act?
If you live in the US and are considering purchasing your first home. Then Biden First Time Home Buyer Act may interest you. The bill offers a $15K tax credit to a qualified person who pays income taxes in their state and buys their first home. It also introduces wealth-building options to historically marginalized residents who experienced a racial homeownership gap due to discriminatory lending practices.
The idea behind the bill is simple: it gives people who don’t already own homes a chance at owning one by providing them with this financial assistance. This can help cover closing costs or down payments when buying their first home. So, before you write a Letter to Seller of your dream home, be sure to check if you qualify for this program for first time homebuyers.
How Does A First Time Homebuyer Act Actually Work?
The Biden First Time Homebuyer or $15K First Time Homebuyer Tax Credit of 2021 is not a loan to be repaid. It is a refundable tax credit, meaning you will receive money back even if you have paid no income taxes during the year. This type of credit does not require repayments like other types, such as mortgages and student loans.
The amount of your home’s purchase price that qualifies for this credit depends on several factors, including:
- Your age at the time you buy your first home
- Home should be purchased from January 1, 2021
- You must be an eligible first time homebuyer (more on this below)
If you met these criteria and purchased your home from January 2021. Then 10% of the home’s purchase price can be claimed such a tax credit against income taxes. However, according to the First Time Homebuyer Tax Credit Act, the credit may not exceed $15K.
Eligibility For First Time Homebuyer Tax Credit
The first step to qualifying for the credit is determining whether you and your spouse have paid off any previous home loans. If you have, neither of you will be eligible for this credit, regardless of how much money you make. In addition, if either of you has a home as your primary residence. Then neither will qualify for the tax credit.
However, suppose neither of these circumstances applies. In that case, both partners can prove that they have never owned a home before buying their current one. Then they may be eligible for First Time Homebuyer Tax Credit. The following requirements to qualify for Biden First Time Homebuyer Taxation Credit are:
You Must Be A First Time Homebuyer
To be eligible for this first time homebuyer tax credit, you must be a first time homebuyer. This first time homebuyer is a person who has not held a primary residence in the past three years before purchasing their new primary residence. This includes vacation homes and second homes.
You Must Avail First Time Homebuyer Tax Credit Only Once
If you’re new to home buying, it’s important to note that you may use the tax credit only once. For instance, if you purchase homes in 2021 and decide to use the credit, then buy another one in 2026, you will not be eligible for the same benefit.
Also, remember that taking the credit will reduce your federal income tax bill. This can help you more easily afford the monthly payment and other expenses associated with homeownership.
The government offers first time homebuyers tax credits to help with their purchases. It doesn’t apply to all situations, but if you’re eligible and use it correctly, this can be an excellent way for new homeowners to curb housing costs.
Your Income Should Not Be Above 60% Of The Area Median Income
This first time homebuyer tax credit is also subject to income limits. You can be eligible for full credit if your household income is less than 60% of the area’s income and you don’t own another home.
The income levels differ depending on where you live, so check with your local tax office to find out what it is in your area. However, higher earnings levels are allowed for homes with numerous income earners.
Remember, this is a tax credit. You don’t get to keep the money you’re saving from paying taxes unless you qualify for it each year. That’s why it’s essential to know your household income and whether or not you meet these requirements.
You Must Be 18 Years Old & Above
You must be 18 years old & above to qualify for the Biden First Time Home Buyer Tax Credit. This rule prevents adults from purchasing a house with cash in a kid’s name, claiming the credit on the minor’s income tax returns.
You Must Be Purchasing A House From A Non-Family Member
You can only use the Biden First Time Home Buyer Tax Credit if you are buying a house from a non-relative. If you are purchasing a home from a relative, you can not use first time homebuyer credit.
For example, suppose that Joe bought his sister’s house for $300,000 and received $10,000 in cash to help him buy it. Since he did not purchase the home from anyone else and received money as part of this transaction, he will not be eligible for any of those benefits.
What Is The Downpayment Toward Equity Act?
This Down payment Toward Equity Act is an excellent program for first time buyers. With this act, you can receive up to $25K in cash towards your home purchase down payment. It also helps with other closing costs such as title insurance, appraisal fees, and inspection charges.
You may also use it for discount points and other home purchase expenses that may come with your mortgage loan process. This works by providing eligible first time homeowners with up to $25K as closing costs and a down payment grant on the quality housing loan.
The best part about this bill is that it doesn’t require any upfront cost either: no fees or interest rates are attached once you sign up for this program.
Importance Of The Downpayment Toward Equity Act
This bill makes it easier for a first time home buyer to get a loan with downpayment assistance. This Act will provide you with a down payment assistance for up to $25K.
In addition, This Act also aims to reduce racial disparity in homeownership, as black and Hispanic Americans have more potential to come from disadvantaged backgrounds.
The bill also levels the playing field for disadvantaged groups by reducing financing costs and closing the disproportionate homeownership gap that affects minority communities. It’s important to note that this bill is not just about helping homeownership rates.
It also serves as an economic recovery act, essential for America’s future prosperity. It’s one of the most potent pieces of housing legislation since the Housing And Urban Development Act and 1968 Fair Housing Act.
How Does A Downpayment Toward Equity Act Actually Work?
This Downpayment Toward Equity Act is a mortgage loan program created by the federal government. This act helps first time homebuyers to buy their first residence through a downpayment grant.
This is why it’s also called a Down Payment Assistance Act, and it’s not a loan or a tax credit. Eligible home buyers can use the funds as they want. Still, they should understand some of the limitations before they do so.
Moreover, suppose you’re a first time home buyer. In that case, you can use First Time Home Buyer Cash Grant to renovate your home and for anything else home-related.
Downpayment Toward Equity Act Eligibility
This Act is a law that provides a home buyer up to $25K in down payment support. This amount can match your own funds and private financing. And it’s intended to help first time homebuyers get into homes they may not otherwise afford on their own. To be eligible for this program, you must:
Must Be A First Time Home Buyer To Avail Down Payment Assistance
If you’re interested in taking advantage of this Downpayment Toward Equity Act program, you must be a first time home buyer. This means that you don’t own any primary residences in the last three years before entering into an agreement to purchase homes or build a newly constructed home with the assistance of this program.
Must Be First Generation Home Buyers
To be eligible for the program, you must be a first generation home buyer. First generation home buyers are someone whose parents or legal guardians have not owned a home at any point in their lives.
In other words, if your parents bought a house before you were born and lived there until they passed. Then you are not considered first generation home buyers under this definition.
However, suppose one of your parents lost the home in foreclosure (when they couldn’t afford payments on the mortgage). In that case, you may qualify as a first generation buyer even though you might have lived in that residence throughout the home buyer’s lifetime.
In addition to these limitations on previous homeownership experience by family members, an eligible home buyer must also meet specific income criteria established by HUD.
Must Earn Below 20% Of The Area Median Income
To be eligible for the program, you must earn an income below 20% over the area median income purchase price. The income is based on all families in a geographic location. It includes different kinds of families: single-person households, married couples without children, older adults living alone, and others.
Use A Mortgage From The Five Government Mortgage Agencies
To be eligible for this Downpayment Toward Equity Act program, you must use a mortgage backed by one of the government mortgage agencies. The government agencies are the Federal Housing Administration, Fannie Mae, Freddie Mac, USDA, and the Department of Veterans Affairs.
These are your only options if you want to take advantage of this benefit. You can’t choose any other kind of Private Mortgage Lenders or financing without disqualifying yourself from the program.
Must Complete Homeownership Education Course
You must complete an online or face-to-face homeownership education course to be qualified for this Downpayment Toward Equity Act program. This program is offered through the Homebuyer Education Program, a free class that anyone can take. It’s provided by local housing agencies, organizations, and counseling agencies throughout the country.
There is no doubt that the Bidens First Time Home Buyer Tax Credit and Downpayment Toward Equity Act are two of the most popular programs for first time homebuyers since 2021. With these two programs, you can be sure to take advantage of tax credits and down payment assistance from the government. You may also consider additional alternatives if these options do not meet your specific needs.
If you want help purchasing your dream house, HOMES by ARDOR is here to help. Our trusted real estate agents will work with you to find a home that fits your needs and budget. Whether it’s through a government program or not, we’ll guide you every step of the way.