Is There a First-Time Homebuyer Tax Credit in 2023? Is There a First-Time Homebuyer Tax Credit in 2023?

If you're a first-time homebuyer, it's important to know that there are a host of incentives available to help make your dream a reality. These include federal, state, and local grants, tax credits, and other first-time homebuyer programs to help first-time homebuyers achieve their homeownership goals. 

Below, we'll dive into who can qualify as a first-time homebuyer, whether there is a federal tax credit available to first-time homebuyers, as well as other federal and state assistance available to first-time buyers. 

Quicklinks:

• Who May Qualify as a First-Time Homebuyer?
• What is President Biden's First-Time Homebuyer Act of 2021?
• What About the 2008 First-Time Homebuyer Tax Credit?
• Federal Housing Administration (FHA) Loans
• Veterans Administration (VA) Loans
• Leader Bank Assistance for First-Time Homebuyers and First-Time Homebuyer Programs
• Tips for First-Time Homebuyers

Key Takeaways:

• There are several different ways to qualify as a first-time homebuyer.
• Being a first-time homebuyer makes you eligible for a host of federal, state, and local tax credits, grants, and programs to help make homeownership more attainable.
• The First-Time Homebuyer Act of 2021 would create a federal refundable tax credit for up to 10% of the purchase price of a primary residence up to $15,000.
• There are several other federal programs available for first-time homebuyers including FHA and VA loans.

Who May Qualify as a First-Time Homebuyer?

You may think that based on the name the definition of a first-time homebuyer would be pretty clear cut -- someone who is looking to buy a home who has never owned a home before. However, the criteria to be considered a first-time homebuyer are probably a little bit more inclusive than you think. According to the U.S. Department of Housing and Urban Development, anyone who meets the following conditions is classified as a first-time homebuyer:

• An individual who has had no ownership in a principal residence during the three-year period ending on the date of purchase of the property. This includes a spouse (if meet the above test, they are considered first-time homebuyers).
• A single parent who has only owned with a former spouse while married.
• An individual who is a displaced homemaker and has only owned with a spouse.
• An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations.
• An individual who has only owned a property that was not in compliance with state, local, or model building codes and which cannot be brought into compliance for less than the cost of constructing a permanent structure.

If you meet any of the conditions above, congratulations, you'll likely be able to take advantage of a host of grants, credit, and other programs available to first-time homebuyers! First, let's explore whether or not there is a federal tax credit available if you are looking to purchase a home for the first time. 

What is President Biden's First-Time Homebuyer Act of 2021?

With the real estate market extremely competitive in 2023, new buyers are looking for any first-time homebuyer credits or programs that can help them make a competitive offer when they find the right home. During his 2020 campaign, President Joe Biden promised a $15,000 credit for first-time homebuyers, and in 2021 U.S. Rep. Earl Blumenauer (D-OR) and Rep. Jimmy Panetta (D-CA) introduced the First-Time Homebuyer Act to follow through on this. However, Congress has yet to pass the bill, so this credit is not yet available for first-time homebuyers to take advantage of.

If passed, this first-time home buyer tax credit would create a federal refundable tax credit for up to 10% of the purchase price of a primary residence up to $15,000. It gets even better -- the credit would be refundable so if it ends up lowering your federal income tax bill to zero, you'll be eligible to be refunded for any remaining credit on your tax return (unless you are filing as a married couple, in which case the maximum credit would be $7,500). 

So, what's the catch? While nothing is set in stone until the bill passes there are likely a few requirements you'll need to meet to take full advantage of the tax deduction. For instance, if you don't stay in the home as your primary residence for at least five years you may have to repay part or all of the credit. The repayment contingency would likely decrease by a certain percentage every year you live in the house as your primary residence for up to five years.

What About the 2008 First-Time Homebuyer Tax Credit?

You may be thinking "Isn't there already a federal first-time home buyer tax break?" The answer is that there used to be a similar tax credit. Following the economic recession in 2007-2008, President Obama introduced the Housing and Economic Recovery Act (HERA) which included a provision offering 2008 first-time homebuyers to claim a tax credit that would either reduce their tax bill or give them a refund of up to $7,500. Unfortunately for buyers currently in the market for their first home, the 2008 tax credit expired in 2010 so they won't be able to claim it -- only homebuyers who closed on their home on or before September 30, 2010 are eligible for the tax credit.

If you're currently looking to purchase a home for the first time, fear not! While the Economic Recovery Act of 2008 no longer provides a federal tax credit for first-time homebuyers there are plenty of federal, state, and local tax credits, grants, and other programs to take advantage of. 

Federal Housing Administration (FHA) Loans

While the First-Time Homebuyer Act is still in Congressional purgatory, there are still federal first-time homebuyer programs available to help make your dreams of homeownership a reality if you haven't bought a home yet. While Federal Housing Administration (FHA) loans aren't specific to first-time homebuyers, they are generally geared toward helping make homeownership attainable to buyers who may not qualify for a conventional mortgage, especially first-time homebuyers. FHA loans are available for single- and multi-family homes and are insured against default by the federal government.

Generally, FHA loans offer low minimum down payments, reasonable credit expectations, and flexible income requirements without much risk or capital requirements for financial institutions (the FHA doesn't issue loans or set interest rates, it just guarantees them against default). 

Veterans Administration (VA) Loans

The U.S. Department of Veterans Affairs (VA) offers loans that are a great option for first-time homebuyers who are active-duty military members, veterans, or military spouses. VA loans offer more competitive interest rates and no down payment or private mortgage insurance requirements to help the dream of homeownership more attainable for first-time buyers. 

With a VA loan, qualifying first-time homebuyers may be able to obtain a loan with up to a 100% loan-to-value ratio, which means you don't need equity to refinance to a lower rate or take cash out in most instances. And with more flexible borrowing requirements, a lower credit score won't necessarily disqualify you from obtaining a VA loan as you can qualify for a higher debt-to-income ratio. 

Most home purchase lenders will offer VA loans so be sure to check out our VA Home Loans page for more information about the 2023 requirements to qualify for a VA home loan, how to get a VA home loan if you do qualify, and more! 

Leader Bank Assistance for First-Time Homebuyers and First-Time Homebuyer Programs

Leader Bank is proud to offer a range of programs for first-time homebuyers to help first-time buyers meet their homeownership goals:

• Specialized products for low- and moderate-income borrowers
• Flexible FICO requirements with free credit service
• Competitive rates with MassHousing, FHA, and Mortgage Insurance options
• Flexible underwriting options for non-occupants, co-borrowers, and gift funds
• Department of Housing and Urban Development (HUD) – Massachusetts 
• Massachusetts Homeownership Resources – Mass.gov
• MassHousing

Leader Bank’s ONE Mortgage Program is perfect for creditworthy, low- and moderate-income homebuyers and is designed to help meet the credit needs of the communities we serve in accordance with the Community Reinvestment Act.

Leader Bank also works collaboratively with Fannie Mae and Freddie Mac, which were created by Congress to create a supply of affordable mortgage funds across the country, to help ensure that the dream of homeownership is accessible to a greater number of families and individuals. Fannie Mae and Freddie Mac also provide low-down payment mortgages to credit-worthy, low-income borrowers.

In addition to the resources mentioned above, Leader Bank is dedicated to helping first-time homebuyers understand the ins and outs of applying for a mortgage and our dedicated Loan Officers frequently offer workshops to walk you through the mortgage process and answer any questions you may have about homeownership. 

To better understand which of these programs best fits your needs or to learn how to sign up for our next first-time homebuyer workshop, set up a free consultation with one of our Loan Officers today!

Tips for First-Time Homebuyers

The mortgage application process is complex, and there are many factors impacting your application. Knowing what to expect at every stage of the homebuying journey will help us secure you the best mortgage rate and close on your new home quickly.

We understand that many questions arise during this process, so we’ve created a library of resources to answer some of the more common ones. Below are some of the helpful tips we've put together to help guide you through the homebuying and mortgage processes: 

• First-time Homebuyer Resources
• Explore the Loan Process
• Application Checklist
• What Not to Do When Applying for a Mortgage
• What Mortgage Type Makes Sense For You?
• Debunking Homebuying Myths
• Where Do I Start? A Guide For Buying a Home

And be sure to check out our mortgage blog for more articles with help for first-time homebuyers and helpful tips on everything from budgeting for your mortgage payments to how to maximize the value of your new home.

^{The content of this post is provided as general information only and should not be taken as legal, tax or other professional advice. This content of this publication shall not be construed as a recommendation to participate in any specific financial or investment strategy, and Leader Bank, NA cannot provide legal or tax advice concerning the specific tax consequences of a given transaction. Any action that you take due to information or opinions provided in this post is ultimately your responsibility. Consult your attorney, accountant, or tax professional before making any investment or financial decisions. To ensure compliance with requirements under Treasury Department Circular 230, we inform you that the contents of this publication are not intended or written to be used, and may not be used, for the purpose of (i) avoiding U.S. federal tax penalties or (ii) promoting, marketing, or recommending to another party any matter addressed herein. Each taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax adviser.}