Federal Legislation Aims to Help Buyers
Federal legislation aims to help buyers save for a down payment. The goal is to develop a plan similar to a 529 plan, which is a college savings plan that offers tax and financial aid benefits. The plan would be similar to the college savings plan, which would allow homebuyers to save 20% for a down payment in a state-managed savings account allowing contributions from family or even friends.
Through the pandemic, the residential real estate market has been one of the beacon of lights for the American economy. Although, current homebuyers are struggling or finding it impossible to save money still during the pandemic. If initiated, the American Dream Down Payment Act (ADDPA)would allow savings for the down payment of a principal residence to grow tax free.
The ADDPA proposal would allow states to establish and manage down payment savings accounts for homebuyers. Homebuyers would have the opportunity to save up to 20% of today’s housing median, which is $102,080. This amount would potentially rise with inflation. A unique feature is that family and friends would be able to contribute to the account as well. The saved account value could be used for a down payment or other related housing costs without penalty.
Most Americans today are undersaved for emergencies and retirement, and further, the idea of owning a home often leads would-be home buyers into “financial tunnel vision”. If financial utopia could be obtainable, a homebuyer would focus all efforts and resources on acquiring a home. Although doing so would strike consequences, a steady saver would have to define financial cutbacks or have to halt savings for retirement or emergencies in order to accumulate a strong downpayment.
Homebuyers can be offered a percentage as low as 3.5% down with FHA loans, but the Coronavirus and the ensuing unemployment crisis has pushed lenders to raise minimum credit scores, require greater down payments, and present evidence of a six- month savings reserve — a hard task for most Americans!
If you find yourself struggling in this situation, give America’s Moneyline a call today! There are options for you to obtain homeownership even in light of the pandemic.