April 13, 2021

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Mortgage News

First-time homebuyer credit could bring 9.3M renters into the market

The Biden Administration Plan for Initial Home Buyer Tax Credit According to a study by Zillow published on Tuesday, the home ownership potential could be increased in most major metropolitan areas.

In 40 of the 50 largest metropolitan areas, an average of 27.4% of renters could afford a monthly payment equivalent to one-third of their income for a mid-range home if they received up to $ 15,000 in credit for a down payment.

The result, which is based on an analysis of the number of tenants who would be able to obtain a 30 year Federal Housing Administration loan with an interest rate of 3% and a decrease of 3.5%, could help lenders that To compensate for a decreasing refinancing, more buying activity will find more borrowers. The loan could open up to 9.3 million home ownership, according to Zillow.

Renters generally save an estimated 2.4% of their income annually, so it would typically take 14 years to save $ 15,000 on a down payment, according to the study.

A tax credit would work best for more affordable markets like Pittsburgh, where it could get 40% on a medium mortgage. In a more expensive market like Los Angeles, theoretically only 10.1% of renters could buy a home with an FHA loan.

Since the lack of affordable housing and eligibility for creditworthiness can lead to qualification problems, this can lead to unintended consequences. Credit availability was generally relatively tighter during the pandemic.

“While a first-time home buyer tax credit would likely stimulate minority home ownership, it could disproportionately benefit White and Asian Americans, who are better positioned due to better access to credit and higher incomes,” Lee said in the report.

Temporary Home Buyer Tax Credits Passed by Congress during the great recession Most studies show that residential activity increased in the short term, but did not have a lasting impact on the market. If a similar tax credit evolves from Biden, the outcome may be the same.