Everything you need to know about Biden’s $15,000 homebuyer tax credit!

What does it do?

If approved, the legislation will provide up to $15,000 in down payment assistance to first-time buyers, and this money will be available by the time you close, rather than making the credit available the following year when filing taxes.

How will it help me?

Nearly four in 10 non-homeowners say not having enough money saved for a down payment is a hurdle to homeownership. Biden's $15,000 homebuyer tax credit will provide you with $15,000 at the time of closing. Most people incorrectly believe you must have at least 20 percent as down payment to purchase a home. However, the minimum down payment requirement on an FHA loan, for instance, is 3.5 percent. So if you are a first time homeowner looking to purchase a $250,000 home. A 3.5 percent down payment through an FHA loan would equal $8,750. This means that if you are looking to purchase a home for $250,000 (or even for a home priced higher), you will not need to worry about coming up with any money for a down payment to obtain a mortgage.

When will this be available?

There is no guarantee that Biden's proposed $15,000 homebuyer tax credit for first time home buyers will become a reality. In order for it to be approved, it will need Congress to pass legislation. If it does eventually get passed by the Congress, there is no indication when that will happen or how much this proposal will change by the time it becomes a law. However, the proposal is not entirely a fairy tale either. A similar legislation was passed in 2008 where the first-time homebuyer tax credit allowed a tax credit for a percentage of the purchase price of a home for taxpayers who had not owned their homes in the previous three years.

What are some things to watch out for?

Although this tax credit will help you come up with a down payment to help pay for your first home, there is no reason to believe that this will also cover the closing costs. Closing costs are fees and expenses you pay when you close on your house, beyond the down payment. These costs can run 3 to 5 percent of the loan amount and may include title insurance, attorney fees, appraisals, taxes and more.

Another thing to consider is that you may have to repay this amount to the IRS over a number of years. In the previous reiteration of his legislation in 2008, the tax credit had to be repaid over 15 years in equal installments. However a later legislation removed the obligation to pay back the tax credit as long as you lived in the house for at least three years. If Biden's proposal does pass, any repayment requirement will not be known until it becomes the law.

If you have any further questions, please reach out to any one of our expert realtors!