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1 Big Change Biden Wants to Make That Would Help Homebuyers

A young couple moving boxes and plants into a new apartment.

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It's often said that people who own homes have more financial stability than renters, and that has proven to be the case during the coronavirus pandemic. But for many Americans, one of the biggest barriers to homeownership is lack of funds.

Current Democratic presidential candidate and former Vice President Joe Biden recognizes the difficulty Americans face in becoming homeowners. And this difficulty has only grown over the past several months. The summer of 2020 saw record low mortgage rates, but housing inventory has been extremely limited, driving home prices up -- and making it harder than ever to buy.

Thankfully, Biden has a plan to make homeownership more attainable: He's proposing a $15,000 tax credit that will help prospective buyers come up with a down payment.

A much-needed measure of help

Biden's proposal is called the First Down Payment Tax Credit, and its goal is to give first-time buyers $15,000 toward the purchase of a new home. Biden's tax credit is both refundable and advanceable, and here's what that means.

Tax credits come in two varieties: refundable and non-refundable. The most a non-refundable credit can do is reduce a tax filer's liability to $0. A refundable credit, however, will pay a filer the sum he or she is owed once that tax liability falls below $0. As such, those who qualify for Biden's credit could actually get a refund of up to $15,000.

Plus, the credit is advanceable, which means prospective buyers won't have to wait until they file their tax returns to get it. Instead, they can get that money when they need it most: when they're ready to buy a home.

Will Biden's tax credit really make homeownership more affordable?

In theory, it should. Coming up with a down payment is a major challenge for low and even moderate earners, so getting $15,000 toward a first-time home purchase could spell the difference between getting to become a homeowner or having to wait several years to reach that milestone. Biden's tax credit may also be instrumental in helping minorities who have historically struggled to buy.

Of course, one thing to keep in mind is that buying a home in the near term may prove difficult, even if Biden's tax credit becomes a reality. The housing market is so tight right now that buyers are being forced to out-bid one another, driving home prices through the roof and negating whatever savings might otherwise be reaped by capitalizing on today's historically low mortgage rates. But once the housing market settles down and inventory picks back up, Biden's $15,000 credit could result in an uptick in homeownership. And that, in turn, could help many more households reach financial security.

Incidentally, Biden is also committed to enforcing fair housing and mortgage lending practices to help ensure that prospective buyers aren't subject to discrimination. If his proposals go through, homeownership could become far more accessible to those who have long struggled to buy.

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