Over the past several months, former President Donald Trump has floated a number of ideas aimed at helping Americans buy homes again. Among them are proposals such as 50-year mortgages and other creative financing tools intended to lower monthly payments for buyers struggling with today’s interest rates.
The intention behind these ideas are novel and understandable. Housing affordability has become one of the biggest economic challenges facing Americans. Mortgage rates remain far higher than they were just a few years ago, and the cost of housing has continued to rise across most of the country. However, extending mortgages to 50 years or simply stretching loan terms may not truly solve the problem. In many cases it simply spreads the cost out longer rather than lowering the overall burden.
So here is another idea to consider. Right now, the federal government is collecting billions of dollars through tariffs and other revenue streams. Much of that money simply flows into general federal funds. What if a portion of those funds were used to directly support first-time homebuyers who use federally backed mortgages?
My concept is simple… If a buyer qualifies as a first-time homeowner and is purchasing a property using a federal loan program such as an FHA or VA mortgage, the federal government could contribute up to 6 percent of the purchase price toward the buyer’s closing costs or interest rate buydown.
In other words, the assistance would move from one federal program to another. The buyer uses a federal loan, and the federal government helps reduce the upfront costs. It is essentially Fed-to-Fed support designed specifically for first-time buyers and veterans.
To understand the impact, consider the numbers. According to the National Association of Realtors, the median price of an existing home in the United States has recently hovered around $390,000. A 6 percent contribution on a home at that price would equal approximately $23,400. That amount could make a dramatic difference for a first-time buyer. Mortgage rate buydowns are commonly priced in “points,” where one point equals one percent of the loan amount. According to data from Freddie Mac and industry lending guidelines, each point typically reduces the mortgage rate by roughly 0.25 percent. That means lowering a mortgage rate by 0.50 percent to 1 percent could cost somewhere between 2 and 4 points, depending on market conditions.
On a $390,000 home purchase, a buyer’s loan might be roughly $370,000 after a down payment. A 2- to 4-point buydown could range from $7,400 to about $14,800. With a $23,400 federal contribution available, a buyer could potentially lower their interest rate by up to a full percentage point and still have funds remaining to cover closing costs. That kind of assistance would immediately improve affordability.
A lower interest rate reduces the monthly mortgage payment. Lower closing costs reduce the cash needed to buy a home in the first place. For many first-time buyers, that upfront cash requirement is the biggest barrier to homeownership.
Of course, safeguards would need to be built into the program. For example, the home could be required to be owner-occupied for a certain number of years. Income limits or purchase price caps could be included to prevent abuse. These are normal provisions in most housing assistance programs. But the impact could be significant. Such a program would stimulate housing demand, help young families enter the market, and provide meaningful support to veterans who rely on VA loans. At the same time, it would inject energy into the broader housing industry, including builders, lenders, and local economies tied to real estate activity.
And politically, it would be a powerful win. If Donald Trump were to champion a program like this, he could legitimately say that during his leadership the federal government helped first-time buyers and veterans overcome high interest rates and achieve homeownership.
Sometimes, the best solutions are not about inventing complicated financial products. Sometimes, they are about using existing tools in smarter ways. Helping first-time homebuyers reduce their mortgage costs might be one of the most effective housing policies Washington could implement right now. So, if you are reading this, please share it with President Donald Trump.
Bobby Bryant is the CEO of homhub.ai.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners. To contact the editor responsible for this piece: [email protected].
