Many homebuyers have struggled to purchase a home this year as property values have soared nationally. But even in a normal market, it can be difficult for first-time buyers to break in, especially those with income constraints. But a new proposal in the works could soon make it easier for new buyers to find their place.
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Presentation of the LIFT law
Democratic lawmakers recently introduced a bill that would create a new mortgage lending program through the Department of Housing and Urban Development.
To qualify, buyers should:
- Buying a home for the first time
- Be first generation buyers (i.e. the first in their family)
- Provide proof of income equal to or less than 120% of the region’s median income
Under the Low-Income First Time Buyer (LIFT) law, first generation borrowers would be entitled to take out a 20-year mortgage at a competitive interest rate. In fact, the Treasury Department would subsidize mortgage interest rates so that borrowers’ monthly payments would be in line with a new 30-year FHA loan.
Many homebuyers, especially those with lower incomes, cannot take a 20-year loan because they need to keep their monthly payments as low as possible, which a 30-year mortgage typically allows. This new program would allow first-time buyers not only to benefit from competitive interest rates on their mortgages, but also to repay these loans more quickly.
An effort to open up the housing market
Low-income workers have long struggled to buy property, and with this proposal, lawmakers are taking action to make the housing market more accessible. The LIFT Act is not the only current proposal to make it easier for new home buyers to buy homes. As part of his campaign, President Joe Biden introduced a $ 15,000 first-time home purchase credit that would make it easier for mortgage applicants to find funds for a down payment.
A difficult market to navigate
States have a variety of programs available to first-time home buyers. But the reality is that today, even with help, many buyers are struggling to buy their own homes.
In the second quarter of 2021, house prices rose 17.4% nationally compared to the second quarter of 2020, according to the Federal Housing Finance Agency’s house price index. It’s a huge leap.
Plus, while mortgage rates can be good and attractive these days, there is still not a lot of home inventory to choose from. The supply of available housing increased slightly over the summer, but stocks are still far from sufficient to meet buyer demand. This has led many houses to find themselves in bidding wars, which usually causes the prices to rise even more.
Still, it’s a good thing that lawmakers are getting involved in helping first-time home buyers and low-income buyers own a home. It’s often said that homeownership can lead to greater financial stability, and it’s something that buyers of all income brackets deserve to be able to enjoy.