What Is the $25,000 Downpayment Toward Equity Act?

By: Craig Berry Updated By: Ryan Tronier Reviewed By: Paul Centopani
May 6, 2024 - 7 min read

If passed, you may get up to $25,000 to buy a new home

First-time home buyers may be eligible to receive a $25,000 grant to purchase a new home through the Downpayment Toward Equity Act.

The Act, also known as the $25,000 First-Time Buyer Home Grant, stems from a Biden campaign promise to help Americans enter the housing market. This cash grant program was introduced in 2021, and while not yet passed, it has been reaffirmed in President Biden’s 2024 fiscal year budget proposal.

In this article, we’ll cover a simple overview of the program, including information on first-time home buyer eligibility, the proposed process for claiming the grant, and when the program is expected to be available.

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What is the Downpayment Towards Equity Act?

The Downpayment Toward Equity Act is an innovative legislative proposal aimed at helping first-time, first-generation homebuyers achieve their dreams of homeownership. It proposes up to $25,000 in financial assistance to cover the upfront costs of a home purchase. Eligible home buyers can use the grant funds for expenses like a down payment, mortgage closing costs, or securing a lower mortgage interest rate.

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This initiative seeks to close the homeownership gap, particularly for moderate- and low-income households. Although any qualified home buyer is eligible for grants through the Downpayment Toward Equity Act, it has been designed to assist “socially and economically disadvantaged homebuyers,” which includes Americans with disabilities, Asian American, Black, Hispanic, and Native American buyers.

The U.S. Department of Housing and Urban Development (HUD) would oversee the distribution of the estimated $175 billion in grant subsidies, with select community-based nonprofits and local housing agencies running the program at a state level.

One of the biggest advantages of the $25K first-time homebuyer grant is that, instead of receiving the funds in the form of a tax credit, grant funding is awarded in cash at the time of closing. Homebuyers won’t have to wait until tax time to recoup these expenses. Instead, if approved for the grant, you’ll get assistance when it is most needed.

Did the $25,000 down payment grant get passed?

The Downpayment Toward Equity Act was introduced in Congress in 2021. As of 2024, it has not yet been passed into law.

The most recent development occurred on March 9, 2023. The White House proposed its budget for the fiscal year 2024, allocating $175 billion for affordable housing programs, including $10 billion for cash grants for first-time home buyers.

Some industry experts hope the legislation will be approved in some capacity before the end of 2024.

What is the current status of the Downpayment Toward Equity Act?

As of March 2024, the Downpayment Toward Equity Act has not been passed. Currently, you are unable to apply for or receive a $25,000 homebuyer grant.

  • The proposed legislation is part of the 2023–2024 Congress session.
  • It’s evolved from its previous iteration, the Downpayment Toward Equity Act of 2021 (H.R. 4495), which expired with the last Congress.
  • Rep. Maxine Waters introduced both the previous and current House versions, while Senator Raphael Warnock oversaw the Senate version during the prior session.

The updated Downpayment Toward Equity Act of 2023 is still awaiting reintroduction in the Senate, with no timeframe given to the public.

Downpayment Toward Equity Act requirements

If approved, eligible first-generation, first-time home buyers could apply the $25,000 cash grant towards a home purchase, provided they meet additional qualifying requirements.

It’s important to understand that all home buyers within the household must meet the program’s eligibility requirements. This means that even if one member of a household is ineligible for the grant, the entire household may not be able to receive cash grant funds.

Here’s what we know so far about the Downpayment Toward Equity Act eligibility requirements.

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First-time homebuyer

Grant funds are meant for first-time buyers who are purchasing primary residences. To qualify as a first-time homebuyer, you must not have owned or co-signed on a mortgage loan in the past three years.

First-generation homebuyer

These grant funds are also reserved for first-generation buyers. You can qualify for this program if your parents, legal guardians, spouse, or domestic partner have not owned a home in the past three years. This requirement is waived for all home buyers who have previously lived in foster care and fall within the program’s income limits.

Household income limits

The Downpayment Toward Equity Act is limited to potential homeowners who earn less than 120% of the area median income. However, in high-cost real estate markets, buyers may qualify if they earn up to 180% of the area median income.

Property types

You can use grant funding to purchase a single-family home, condo, or manufactured home. You can also purchase a multi-unit home with up to four units, provided you live in one of the units while renting out the others.

However, you cannot use the Downpayment Toward Equity Act grant to purchase a second home or rental property.

Mortgage loans

The $25,000 cash grant is available for any conventional loan that Freddie Mac or Fannie Mae guarantee. Furthermore, the Downpayment Toward Equity Act will apply to all qualified mortgages, including FHA, VA, USDA, and Section 184 loans.

Five-year residency

You must live in the home for at least five years to remain qualified for the program. If you sell the home sooner, you’ll have to repay part or all of the funding. However, if your profit from the sale is less than your repayment amount, you are not required to repay it.

Housing counseling course

Eligible home buyers must also complete a HUD-approved homebuyer education course. Most courses are estimated to take 90 minutes or less. You can find a home counseling agency by visiting the official HUD.gov website, which provides a searchable database of approved agencies nationwide.

Alternative down payment assistance programs

Aspiring homeowners need not wait for the Downpayment Toward Equity Act to buy a home. Across every state and county in the U.S., a variety of financial assistance programs exist specifically designed to support low- and moderate-income borrowers during the home-buying process.

First-time home buyer programs help borrowers transition from renters to homeowners. These initiatives provide financial aid that helps people qualify for home loans and potentially lower monthly payments through benefits like reduced mortgage rates or help with mortgage insurance.

Down payment assistance programs (DPAs) offer financial assistance or incentives to make the dream of owning a home more accessible. These programs can take several forms, including:

  • Cash grants: Direct funds to cover down payment costs without repayment.
  • Deferred loans: Loans that don’t require payment until you sell or refinance the home.
  • Second mortgages: Second mortgages are provided at low or no interest to be paid alongside first mortgage loans.
  • Closing cost assistance: Closing cost assistance is designed to help cover the upfront fees of securing a home loan, such as fees for a home appraisal, pulling your credit score, title insurance, loan origination, and other expenses.
  • Tax credits: Mortgage credit certifications (MCC) allow homeowners to deduct a portion of the mortgage interest they pay each year.

If you’re struggling to find an assistance program that fits your needs, consider exploring loans offered through government agencies, like an FHA loan or a USDA loan. These home loans are great for first-time buyers because of their low down payment requirements.

FAQ: Downpayment Toward Equity Act

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Is Biden giving $25,000 to first-time home buyers?

Yes, President Biden has proposed the Downpayment Toward Equity Act, which aims to provide first-time home buyers with up to $25,000 in grants. This grant is intended to help cover various home-buying expenses, such as down payments, closing costs, and possibly interest rate reductions. However, as of March 2024, this bill is still in Congress and has not become law.

When will the $25,000 First-Time Home Buyer Grant pass?

The $25,000 First-Time Home Buyer Grant’s passage date is currently uncertain. As a proposed bill, the Downpayment Toward Equity Act must go through the legislative process in Congress, which includes approval by both the House of Representatives and the Senate, followed by the President’s signature, to become law.

Who sponsors the Downpayment Toward Equity Act?

Rep. Maxine Waters (California) and Sen. Raphael Warnock (Georgia) introduced the Downpayment Toward Equity Act in the House of Representatives and the Senate in 2023. As of 2024, the bill is awaiting reintroduction in the Senate for the current Congress session​

How much do first-time home buyers get in grants?

First-time home buyers can receive grants ranging from a few thousand dollars up to 3% to 5% of the home’s purchase price, depending on the program or incentive. State and local housing agencies and nonprofit organizations work with approved mortgage lenders to offer these types of first-time home buyer programs.

Bottom line: You may already qualify for a mortgage loan

Discover today if you’re eligible for a home loan by exploring the links provided below. You don’t have to wait for legislative proposals like the $25,000 first-time home buyer grant to become a reality.

Taking action now could be your first step towards homeownership, unlocking a future where your dream home is within reach.

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Craig Berry
Authored By: Craig Berry
The Mortgage Reports contributor
With over 20 years in mortgage banking, Craig Berry has helped thousands achieve their homeownership goals.
Ryan Tronier
Updated By: Ryan Tronier
The Mortgage Reports Editor
Ryan Tronier is a personal finance writer and editor. His work has been published on NBC, ABC, USATODAY, Yahoo Finance, MSN Money, and more. Ryan is the former managing editor of the finance website Sapling, as well as the former personal finance editor at Slickdeals.
Paul Centopani
Reviewed By: Paul Centopani
The Mortgage Reports Editor
Paul Centopani is a writer and editor who started covering the lending and housing markets in 2018. Previous to joining The Mortgage Reports, he was a reporter for National Mortgage News. Paul grew up in Connecticut, graduated from Binghamton University and now lives in Chicago after a decade in New York and the D.C. area.