President Biden has proposed offering a tax credit of up to $15,000 to first-time homebuyers that could take the form of a refundable advance.
While there are few other details about the credit, a recent Zillow report estimates that it would cover the entire down payment on a typical home in 40 out of the 50 largest metro areas nationwide — but DC is not one of them.
In the DC area, a $15,000 tax credit would come $225 shy of covering the typical down payment. However, with some down payment assistance, roughly 32% of renter households would be able to afford the typical monthly mortgage payment of $2,351 without being "cost-burdened". The median household income for renters in the DC area is $70,000.
Nationwide, about 27.4% of renter households would be able to afford the typical monthly mortgage payment in their metro area. Zillow's analysis assumes a 3.5% down payment for a 30-year mortgage with 3% interest rate, and the monthly mortgage payment includes insurance and property tax.
Saving for a down payment is often cited as the largest hurdle to homeownership. A similar tax credit was available as part of relief from the Great Recession, although that credit was not advanceable and could therefore not be used to make the home purchase. Even this credit, however, could disproportionately benefit white and Asian households, and it is unclear the extent to which people would be able to take advantage of such a credit with housing supply being severely constrained.
This article originally published at https://dc.urbanturf.com/articles/blog/what-a-15000-first-time-homebuyers-credit-could-do-in-the-dc-area/18013.
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