The "One Big Beautiful Bill Act" is helpful for many homeowners. But there aren't any provisions for federal down payment assistance or homebuyer tax credits.
The government's tax and spending legislation is now law. There's plenty that's good for homeowners and first-time buyers. But there are also long-hoped-for provisions that didn't make it in.
Background
On July 4, the president signed into law his signature "One Big Beautiful Bill Act" (OBBBA). The new law runs to 1,000 pages. So far, little media coverage has focused on the act's effects on homeowners and first-time home buyers.
National Mortgage Professional did a roundup, where we did much of our research.
OBBBA Homeowner Provisions
The deduction for mortgage insurance becomes permanent
Almost every home buyer with a down payment worth less than 20% of the home's value must pay for mortgage insurance (private mortgage insurance, or PMI, for conventional loans, and mortgage insurance premium, and MIP for FHA.) These monthly payments can add up, often totaling hundreds of dollars every month.
Once the new law is implemented, homeowners will be able to deduct those payments from their federal tax returns, subject to income limits, assuming they itemize their deductions. The OBBBA makes this allowance permanent.
The deduction for mortgage interest doesn't fall
Itemizing tax filers can deduct interest on up to $750,000 of mortgage debt to acquire housing. That's the same as the current deduction cap, but at least it isn't lower. And it became permanent and therefore reliable for some years.
State and local tax (SALT) deduction increases
Once the OBBBA is implemented, homeowners will be able to deduct up to $40,000 annually (up from $10,000) for their state and local property tax bills. In states where these taxes are especially high (think California, Illinois, New Jersey and New York), this can make a big difference, especially for those with big homes but moderate or fixed incomes.
There are a couple of caveats for this provision:
- Deductibility tapers away for those with incomes over $500,000
- This is a temporary measure, and it is due to expire in 2029
Support for affordable housing
The OBBBA provides a boost for the low-income housing tax credit, opportunity zones, and homeownership incentives, according to law firm McGuireWoods. The first two of those are great because they could provide a significant increase in the supply of affordable rented accommodation.
What about first-time buyer grants?
The bill is missing additional financing for state housing finance agencies (HFAs), which are important to down payment assistance programs nationwide.
HFAs rely heavily on federal funds for their DPA programs. The hope is that federal support of HFAs will at least be maintained.
And the big question: Does the bill provide first-time buyer grants?
No first-time or first-generation homebuyer grants or tax credits were part of the bill.
"The law contains no first-time homebuyer tax credit or first-generation down payment grant. Several housing program rescissions are included, such as the U.S. Department of Housing and Urban Development’s (HUD) Green and Resilient Retrofit Program," says National Mortgage Professional. "Federal down-payment assistance is not coming from this bill."
Those who have long anticipated a large federal first-time buyer grant should look into programs from cities, counties, employers, and other local programs.
