A boost for homeownership
First-time home buyers may be eligible to receive a $25,000 cash 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 purchase quality housing. The cash grant program was introduced in 2021, and while not yet enacted, 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 eligibility for first-time homebuyers, the process for claiming the grant, and when the program is expected to be available.Find your lowest interest rate. Start here
What is the Downpayment Towards Equity Act?
The Downpayment Toward Equity Act is a first-time homebuyer grant bill. The bill was proposed to make homeownership more accessible for low-income or otherwise disadvantaged individuals and families across the U.S.
The proposed program is meant to provide up to $25,000 to those preparing to purchase their first home. Buyers who are first-generation homeowners qualify for $20,000 in assistance, and an additional $5,000 is available for buyers who are considered socially or economically disadvantaged.Find your lowest rate. Start here
The grant money could go toward various home-buying expenses that would otherwise make it difficult, if not impossible, to buy a house. Home-buying expenses that could come from the grant funds include:
- Down payment costs
- Closing costs
- Buying down your interest rate (loan discount points)
One of the biggest advantages of the $25K first-time homebuyer grant is that, instead of receiving the funds in the form of tax relief, 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 the 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 mid-2023, it has not yet been passed into law.
Currently, the bill is still being considered by Congress and is subject to debate, negotiation, and potential changes before it can be approved and signed into law by the President. Many legislators and industry experts, however, are optimistic that first-time buyers will soon be able to benefit from the bill.
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 anticipate that the legislation will be approved in some capacity before the end of 2023.
The Downpayment Toward Equity Act requirements
The Downpayment Toward Equity Act is intended for homebuyers who meet certain criteria.
Grant funds are meant for first-time buyers — defined as those who haven’t owned a home in the prior three years.
The funds are also reserved for first-generation buyers. With wealth having a strong generational component and closely linked to homeownership, this program exists to help individuals boost their own financial future and the future of their children by breaking into the real estate market.
You can qualify for this program if your parents or guardians have never purchased a home in the United States. This requirement is waived for all home buyers who previously lived in foster care.
Eligible income bracket
The program is limited to homebuyers who earn less than 120% of the area median income. In a high cost-of-living area, though, buyers may qualify if they earn up to 180% of the median income in the area.
It’s important to note that the grant cannot be used to purchase a second home or rental property, and 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 the funds.
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 the funding. However, if your profit from the sale is less than your repayment amount, you are not required to repay it.
Homeownership education course
Homebuyers must also complete a government-approved homeownership education course. Most courses are estimated to take 90 minutes or less.Find your lowest rate. Start here
Alternative financial assistance for first-time buyers
Down payment assistance and other housing grants can provide excellent opportunities to first-time homebuyers wanting to join the millions of Americans who already own a home. These programs exist to make homeownership more accessible and to a broader population.
While the Down Payment Toward Equity Act of 2021 hasn’t passed as of July 2023, the act is currently in Congress and could be passed any day. Until then, be sure to explore all down payment assistance options. There are many federal, state and local programs available to first-time buyers.
If you can’t find the right assistance program that suits your specific situation, consider an FHA or USDA loan. These programs are great for first-time buyers because of their low down payment requirements.
The bottom line
Purchasing your first home is a major milestone for most people. Sometimes, it can take years for first-time buyers to achieve this on their own. If the $25,000 first-time buyer grant makes it into law, it will help many first-timers become homeowners.
Consult with a knowledgeable mortgage lender to learn more about the programs available to you that could help you achieve your goal of homeownership.Time to make a move? Let us find the right mortgage for you