Saving a down payment is a major obstacle for many would-be home buyers, especially borrowers looking to get their first mortgage. While a down payment doesn’t necessarily need to be 20% of the purchase price, it can require borrowers to come up with a big chunk of cash.

The proposed $25,000 First-Time Buyer Home Act would help prospective home buyers purchase a home by helping them to fund a down payment.

The Act was originally introduced in 2021. It is still in the current administration’s budget proposal, however, it has not been enacted yet. That means it might undergo changes before becoming law, or it might not ever become law.

Still, here’s what we know about the $25,000 Downpayment Toward Equity Act as it stands right now.

Check your home buying eligibility. Start here (Nov 23rd, 2024)

What is the Downpayment Toward Equity Act?

The Downpayment Toward Equity Act of 2023 is designed to help “close the U.S. racial wealth and homeownership gaps by providing $100 billion in direct assistance to help first-time, first-generation homebuyers purchase their first home.”

If the program became law, financial assistance for qualifying prospective homeowners could include “assistance for down payments, closing costs, and to help buy down mortgage interest rates.” The assistance could total up to $25,000 per prospective home buyer.

The available information on the proposed act indicates the home buyer would receive the grant upfront, instead of as a tax credit. Since the grant proceeds would be awarded on closing, a mortgage lender may use this information as a part of their decision-making process for the mortgage loan.

Did the $25,000 first-time home buyer grant get passed?

As of January 2024, the Down Payment Toward Equity Act has not been passed. The bill was initially introduced in 2021 in the Senate. It is currently being considered by Congress, with no clear indication of how long it might take to become law.

However, in March 2023, the White House included this grant in its proposed budget for the fiscal year 2024. The budget allocated $10 billion for grants to benefit qualified first-time home buyers.

Check your home buying eligibility. Start here (Nov 23rd, 2024)

Who qualifies for the Down Payment Toward Equity program?

The Down Payment Toward Equity program is designed to help first-time, first-generation buyers purchase their first home. Given that, not everyone qualifies for this proposed grant.

If the Act passed in its current state, prospective homeowners would need to meet the following criteria to receive a grant:

• First-time buyers: To be considered a first-time home buyer, a borrower must not have owned a home for the last three years. This means prospective homeowners who sold their last place over three years ago without purchasing another property could qualify for this grant.
• First-generation homebuyers: The grant funds are specifically designed for home buyers whose parents’ never owned a home in the United States. If the home buyer lived in foster care, this requirement is waived. Also, this requirement is waived if the borrower’s parents default on a home loan and experience foreclosure.
• Income requirements: The program is intended for low-income and moderate-income borrowers. Prospective homebuyers must typically have a household income of less than 120% of the area’s median income. In high-cost-of-living areas, the income limits are higher and the borrower can earn up to 180% of the area’s median income and still qualify.
• Residency requirements: Borrowers who plan to use the grant funds to purchase a home must live in the home for at least five years. If the homeowner sells the home before the five-year mark, they will need to repay the grant funds.
• Property requirements: This down payment grant program is only available for real estate properties of one to four units. To purchase a multi-unit property, the homeowner must utilize at least one of the units as a primary residence.
• Housing counseling: A prospective borrower must take a homeownership education course that is approved by the Department of Housing and Urban Development (HUD) before receiving any funds.

Additional funds could be available for some borrowers

Eligible home buyers could receive up to $20,000 in grant funds for their new home purchase. Some specific borrowers may even qualify for extra money, up to $25,000 in grant funding.

To qualify, borrowers must make less than 120% of the area’s median income, or belong to a group that has been subject to racial or ethnic discrimination within the U.S.

Other down payment assistance programs for first-time homebuyers

The Down Payment Toward Equity Act hasn’t been passed yet. If the bill becomes law, it could provide a pathway to homeownership for many aspiring homeowners.

But if this bill doesn’t become law or you just don’t want to wait, there are other down payment assistance (DPA) program opportunities that could make homeownership possible.

Here are a few other first-time homebuyer programs available to first-time home buyers:

• Localized grants from government agencies: Some cities and states offer down payment assistance grant money for first-time home buyers.
• Forgivable loans: Some down payment assistance programs are available as forgivable loans, which means you’ll find a 0% interest rate, the balance is forgiven after a set period of time and no repayment is required.
• Government programs: The FHA loan program and USDA loan programs can offer flexible credit score requirements and low down payment options.

Take some time to explore all of your down payment assistance options as you begin your homeownership journey. If you meet the eligibility requirements, you could move forward with the home-buying process soon.

Check your FHA eligibility. Start here (Nov 23rd, 2024)

$25,000 first-time home buyer grant FAQ

What is Biden’s $25,000 Down Payment Toward Equity Act?

Biden’s Down Payment Toward Equity Act is a down payment grant that offers a pathway to homeownership for first-generation home buyers. If the bill becomes law, qualified home buyers could receive up to $25,000 in grant funding for their home purchase.

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

The Biden administration included grants to first-generation, first-time home buyers in its proposed budget for the fiscal year 2024. It’s possible this cash grant program was included to make good on a campaign promise in a tight housing market with high rates. But the bill hasn’t become law yet, which means President Biden isn’t giving $25,000 to first-time home buyers as of writing.

Who qualifies as a first-time home buyer?

For the purposes of this program, a first-time home buyer is someone who hasn’t owned a home in the last three years.

When will the Downpayment Toward Equity Act pass?

Right now, there is no definitive indication about when — or if — the Downpayment Toward Equity Act will pass.

The bottom line

The Down Payment Toward Equity Act could offer a path to homeownership for many Americans. However, this bill isn’t the law yet. With that, prospective beneficiaries of the program will have to wait and see if the proposal becomes law.

Check your home buying eligibility. Start here (Nov 23rd, 2024)