The “Big Beautiful Bill” affects nearly every aspect of American life: healthcare, tax policy, and border security spending, to name a few. The home mortgage sector is no exception.
Why it matters: Homebuyers and homeowners will see changes to tax deductions, mortgage benefits, and housing supply initiatives. All these factors could affect how mortgage payments are calculated.
Here are three major ways homebuyers and homeowners will be affected by the Big Beautiful Bill.
1. Capped Mortgage Interest Tax Deductions
Who will benefit: First-time buyers using FHA, VA, USDA loans, or putting down less than 20%.
Reality check: The $750,000 cap remains, benefitting middle-income buyers far more than low- or high-income groups.
The bill makes the mortgage insurance deduction permanent for those putting down less than 20%. The deduction covers PMI as well as FHA mortgage insurance premiums, VA loan funding fees, and USDA guarantee fees.
This deduction used to expire and relied on Congress for renewal. It now remains capped at $750,000 instead of returning to $1 million in 2026. Buyers above that threshold may lose out, but the permanence helps with long-term budgeting.
The bill also expands the Low-Income Housing Tax Credit (LIHTC) program, potentially financing 527,000 more affordable rental homes nationwide over the next decade. This is good-to-neutral news for prospective homebuyers, as it:
Lowers overall housing demand pressure. When affordable rentals are scarce, renters have to compete for the few that exist, and some spill over into the entry-level home market before they’re financially ready. This also drives up prices on starter homes. With more affordable rental supply, that spillover slows, easing competition and potentially stabilizing home prices at the lower end.
Allows prospective buyers to save for a down payment. If you can secure a stable, reasonably priced rental property, future buyers can funnel more funds to their down payment pot, giving them some breathing room.
However, it’s a long game: LIHTC projects take years to develop.
Impact will vary. Higher-income buyers and real estate investors may gain the most, while lower-income renters and some first-time buyers might not see immediate relief.
2. Mortgage Insurance Premium Deduction (PMI deduction)
What it covers: Premiums paid for mortgage insurance — not interest.
For conventional loans, this means Private Mortgage Insurance (PMI).
For FHA loans, it’s the mortgage insurance premium (MIP).
For VA loans, it’s the funding fee.
For USDA loans, it’s the guarantee fee.
Who can claim it: Homeowners who itemize deductions and whose income is below a certain threshold (the BBB makes this permanent without annual renewals by Congress).
Purpose: Helps offset the cost of required mortgage insurance, which protects the lender if you default and is typically required when you put down less than 20%.
The Difference Between These Two Deductions
The mortgage interest deduction lowers your taxes for the cost of borrowing the money.
The mortgage insurance deduction lowers your taxes for the cost of protecting the lender because you didn’t put down a big enough down payment.
3. Loss of First-time Homebuyer Credits, Down Payment Grants
Notably absent from the BBB are first-time homebuyer credits and down payment grants. The bill leaves these popular programs that homebuyers often turn to in the hands of state housing finance agencies and local grants.
The BBB does not offer federal support for down payments, which is a significant obstacle for first-time buyers. Smaller down payments scraped together from savings will lead to higher mortgage payments.
Buyers must still rely on state/local programs, which are unevenly distributed and underfunded.
The Bottom Line: The “Big Beautiful Bill” locks in certain tax breaks for homeowners, but with caps that mostly favor middle-income buyers. It offers long-term stability for mortgage insurance deductions and expands affordable housing credits, yet removes federal down payment help and first-time buyer credits. The result: mortgage payments may be easier to manage for some, while others—especially new buyers without large savings—could face higher costs.
Additional reporting by Carmen Chan
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