The bill in legislature to help first-time homebuyers looks a lot different than previous drafts. President Joe Biden’s down-payment assistance bill would provide $25,000 to first-time homebuyers, but only those who are also first-generation homebuyers and economically disadvantaged. It is a not a tax credit, it is money that would be available at closing.
The published draft version of the bill is titled “Downpayment Toward Equity Act of 2021”. This proposed bill would be means-tested based on income, and limited to those who have not owned a house for at least three years. To qualify, neither of the borrower’s parents may have owned a home. That qualification doesn’t apply if the borrowers’ parents lost their home in a foreclosure or short sale, or if the borrower has ever been in foster care, however.
Borrowers who make no more than 120% of the area media income where they live – or if they live in a night-cost area, 180% – would qualify for a baseline of $20,000. Those recognized as socially disadvantaged because they are in a group that has been “subject to racial or ethnic prejudice,” could receive an additional $5,000.
The money at closing could be used toward a down payment on a residential property with one to four units, including a condominium, cooperative project or manufactured housing unit. This program would hand out funds based on population, median area home prices and racial disparities in homeownership rates.
This would not be the first time the federal government has given first-time homebuyers a boost. A Bush-era program, the first-time homebuyer tax credit, allowed borrowers to claim a credit on their income taxes. The Obama administration continued the program until 2010. This new proposed bill would have to clear significant hurdles in both houses of Congress.
We will keep you updated on the process of this bill.