$15,000 Homebuyer Credit – Will it Help?
Biden has been proposing a $15,000 homebuyer tax credit that could help a ton of people be able to afford a home as opposed to renting. Let’s look at some positives and negatives.
It’s a $15,000 savings! That’s huge when “Over the past 20 years, we estimate that renters have been able to save only 2.4% of their income, approximately $440 per year in today’s dollars.” (Parrott & Zandi, 2021) The typical renter is spending so much in rent and is unable to save hardly anything each year to be able to afford a home. This new proposed tax credit could push a lot of renters into the territory of homebuyers sooner than later. This could also especially help Black and Latino buyers as well, who make up a larger pool of renters and a much smaller pool of homebuyers.
In the majority of major metro areas (excluding LA, Boston, San Francisco, San Diego, and San Jose) in the US, $15,000 would cover approximately a 3.5% downpayment or more (3.5% is usually the lowest you can go for an FHA, sometimes 3% for conventional loan). Many renters say one of the biggest impedances to buying a home is saving up for a downpayment. This credit could literally help millions of renters purchase homes.
The biggest problem? There’s no inventory! Right now, current buyers are struggling to find homes at almost any price point due to low inventory. So if you offer a $15,000 homebuyer credit, you’re going to increase the number of buyers in a seller’s market which will make prices go up, not down. This year may not be the best for offering this credit while prices are high and inventory is low.
Another factor is, time and time again, race. Historically, white and Asian people have maintained better credit scores (due to a HOST of external factors) compared to Black and Latino people. So while a $15,000 tax benefit is great, renters still need to have a high enough credit score to qualify for a loan (generally about 580 is the lowest credit score you could have to get an FHA loan). If you’re in the group of ‘my credit score isn’t too great,’ it’s never a bad idea to speak to a legitimate credit repair company to see what you can pay down, or pay off, or do to improve your score. (Drastic changes are rarely good – don’t go closing out bank accounts and credit cards!)
What are your thoughts, especially if you rent? What’s the biggest barrier you have to buying a home?
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