H.R. 7160: First Home Affordability Act

The proposed bill, titled the **First Home Affordability Act**, aims to amend the Internal Revenue Code to introduce a refundable tax credit for first-time homebuyers in the United States. Below is a summary of the key provisions of the bill:

First-time Homebuyer Tax Credit

Under the bill, a **refundable tax credit** will be available to individuals who are defined as *first-time homebuyers*. This is for those purchasing their principal residence during the tax year or within the previous four tax years.

Credit Amount

The credit amount is determined by the following:

• **10 percent of the purchase price** of the primary residence, divided by 5.
• The total credit a taxpayer can receive for a single home purchase is capped at **$25,000**.
• For married individuals filing separately, the cap is **$12,500**.
• If multiple individuals who are not married purchase a home together, the total credit among them cannot exceed **$25,000**.

Income Limitations

The credit is subject to phaseout based on the *modified adjusted gross income* of the taxpayer:

• The credit amount will be reduced if the taxpayer's income exceeds 150% of the area median income.
• The reduction is calculated using a formula based on the excess income over this threshold.

Purchase Price Limitations

The allowable credit may also be reduced if the purchase price exceeds the area median purchase price by a specified ratio.

Credit Period

The credit can be claimed over a **5-year period** beginning in the tax year the residence is purchased. However, there are special rules for specific professions:

Eligibility Requirements

To qualify as a first-time homebuyer, the individual must have no ownership interest in any residence during the three years prior to the purchase. Also, they must not have claimed the tax credit in any previous tax year.

The principal residence must be acquired through a federally backed mortgage and cannot be purchased from a related person.

Reporting and Compliance

Taxpayers must provide documentation of their eligibility when claiming the credit. Additionally, if the residence is sold before the end of the credit period, the taxpayer may have to recapture part of the credit upon sale.

Transfer of Credit

Taxpayers can elect to allow their mortgage lender to claim the credit instead of themselves, provided certain conditions are met, such as the lender disclosing the value of the credit and making advance payments to the taxpayer.

Exceptions

The bill outlines exceptions to eligibility for claiming the credit, including circumstances such as:

• Disposing of the residence before the end of the credit period.
• Failure to comply with eligibility documentation requirements.

Inflation Adjustments

All dollar limitations mentioned in the bill will be adjusted for inflation starting from 2026.

Effective Date

The provisions of the act will apply to residences purchased after the enactment date of the bill.

Relevant Companies

• FNF Group (FNF): As a provider of title insurance and related services, FNF could see increased demand from first-time homebuyers who benefit from the tax credit.
• Prudential Financial (PRU): Involved with mortgage loans and insurance, Prudential may experience a heightened activity in mortgage lending due to more first-time buyers entering the market.
• MGIC Investment Corporation (MTG): As a provider of mortgage insurance, MGIC may benefit from increased home purchases stemming from the tax credit.