Legislators propose new 20-year mortgage for first-time low-income home buyers

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Many buyers have struggled to buy a home this year as property values ​​are extremely inflated nationally. But even in a normal market, it can be difficult for first-time buyers to get in – especially those with income restrictions. But a new proposal in the works could soon make it easier for new buyers to secure their own spot.

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Introduction of the LIFT law

The Democratic legislature recently tabled a bill that would create a new mortgage program through the Department of Housing and Urban Development.

To qualify, buyers must:

  • First time buying a home
  • Be first generation buyers (i.e. first in their family)
  • Submission of proof of income of no more than 120% of the median income in the region

Under Low-Income First Time Homebuyer (LIFT) law, first generation borrowers would be eligible to take out a 20 year mortgage at a competitive rate. In fact, the Treasury Department would subsidize mortgage interest so that borrowers’ monthly payments match a new 30-year FHA loan.

Many buyers – especially those with lower income – can’t swing a 20-year loan because they need to keep their monthly payments as low as possible, which a 30-year mortgage usually allows for. This new program would allow first-time buyers not only to get competitive rates on their mortgages, but also to pay off those loans sooner.

A push to open up the housing market

Low-income workers have long struggled to buy real estate, and with this proposal, legislators are taking steps to make the housing market more accessible. The LIFT bill isn’t the only proposal designed to make it easier for new buyers to buy a home. As part of his campaign, President Joe Biden introduced a $ 15,000 first-time buyer loan that would make it easier for mortgage applicants to raise funds for a down payment.

A difficult market to navigate

States have a variety of programs for first time home buyers. But the reality is that many buyers are currently struggling to get their own property despite support.

In the second quarter of 2021, home prices rose 17.4% nationally, according to the Federal Housing Finance Agency’s house price index, compared to the second quarter of 2020. That’s a huge jump.

While mortgage rates may be nice and attractive these days, there still aren’t a lot of properties to choose from. The supply of available housing has increased slightly over the summer, but there is still not nearly enough inventory to meet buyer demand. This has led to many houses getting into bidding wars that usually drive prices even higher.

Still, it’s a good thing that lawmakers are investing to help first-time and low-income buyers own a home. It is often said that home ownership can lead to greater financial stability, and that is something buyers of all income brackets deserve to benefit from.

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