President Biden is calling on Congress to give middle-class first-time homebuyers a $10,000 tax credit to help lower their monthly mortgage costs

President Biden is calling on Congress to give middle-class first-time homebuyers a $10,000 tax credit to help lower their monthly mortgage costs.

Biden is also proposing a separate $10,000 tax credit for current homeowners who sell their "starter home" to purchase a larger house. This could help ease a real estate market where homeowners, having locked in low mortgage rates during the pandemic, are hesitant to move due to significantly higher mortgage rates now.

Biden's proposals, which require congressional approval, were applauded by affordable housing advocates. National Housing Council CEO David M. Dworkin described it as "the most consequential State of the Union address on housing in more than 50 years." Practically speaking, the tax credits would reduce the cost of purchasing a home, an issue impacting Americans across all demographics.

"Housing affordability has become a key issue for Americans across all demographics and political divides, and housing policy has mostly remained steady in recent congressional budgets," noted Moody's associate economist Nick Luettke in a report on Biden's efforts.

Here's what to know about the proposals:

What are Biden's homebuying tax credits?
Biden is proposing two tax credits aimed at helping Americans buy homes at a time when housing affordability is near an all-time low.

Currently, Americans need to earn a six-figure salary to comfortably buy a typical home, compared with $59,000 just four years ago. Home prices have surged about 27% since the start of the pandemic, while mortgage rates have spiked, increasing the cost of purchasing.

To help offset the cost of buying a home, Biden is proposing the following tax credits:

• A first-time homebuyer tax credit of $10,000
• A one-year tax credit of up to $10,000 for current homeowners who sell their starter homes

The tax credits are intended to help people afford homes while mortgage rates are high. They would not be permanent but would be available to homebuyers purchasing properties in 2024 or 2025, a senior Biden administration official told CBS MoneyWatch.

The Federal Reserve is expected to cut its key interest rate later this year, which would reduce borrowing costs for various loans, from mortgages to credit cards.

Who would qualify for the tax credits?
First-time homebuyers would qualify for an annual tax credit of $5,000 per year for two years, totaling $10,000.