How to Get $25,000 for Your First Home: A Guide to the Downpayment Toward Equity Act
How to Get $25,000 for Your First Home: A Guide to the Downpayment Toward Equity Act
If you are a first-time, first-generation home buyer, you may be eligible for a $25,000 grant from the federal government to help you buy your dream home. This grant is part of the Downpayment Toward Equity Act of 2023, a bill that aims to address the racial and generational gaps in homeownership and wealth in the United States.
In this article, we will explain what the Downpayment Toward Equity Act is, who can qualify for it, how it works, and what you need to do to apply for it. We will also answer some frequently asked questions about this program and provide some useful resources for further information.
What is the Downpayment Toward Equity Act of 2023?
The Downpayment Toward Equity Act of 2023 is a bill that was introduced in Congress in June 2023 by Representative Maxine Waters and Senator Raphael Warnock. The bill is based on a campaign promise by President Joe Biden to provide down payment assistance to first-time home buyers, especially those from historically disadvantaged groups.
The bill proposes to allocate $100 billion over five years to establish a grant program for states and other entities to provide up to $25,000 in assistance to eligible first-time, first-generation home buyers. The assistance can be used for home purchase expenses, such as down payments, closing costs, interest rates, or modifications.
The bill’s purpose is “to provide downpayment assistance to first-generation homebuyers to address multigenerational inequities in access to homeownership and to narrow and ultimately close the racial homeownership gap in the United States, and for other purposes.”
According to the bill’s sponsors, the Downpayment Toward Equity Act would help millions of Americans achieve the American dream of owning a home, build intergenerational wealth, and reduce racial disparities in homeownership and economic opportunity.
The Downpayment Toward Equity Act timeline is as follows:
- July 17, 2021: H.R. 4495 introduced as Downpayment Toward Equity Act of 2021
- September 30, 2021: S. 2920 introduced as Downpayment Toward Equity Act of 2021
- February 10, 2022: Hearings held in Senate
- June 22, 2022: Hearings held in Senate
- March 9, 2023: White House budget allocates $175 billion for affordable housing programs, including $10 billion for cash grants for first-time home buyers
- June 21, 2023: H.R. 4231 introduced as Downpayment Toward Equity Act of 2023
- July 6, 2023: 31 members of the House of Representatives co-sponsor the bill
Why Is This $25,000 Grant Important for First-Time Home Buyers?
Homeownership is one of the most important ways to build wealth and financial security in the United States. However, not everyone has equal access to homeownership opportunities. According to the U.S. Census Bureau, as of the second quarter of 2023, the homeownership rate for non-Hispanic white households was 73.4%, while the homeownership rate for Black households was 45.1%, for Hispanic households was 49.1%, and for Asian households was 60.5%.
One of the main barriers to homeownership is the lack of affordable housing and the difficulty of saving enough money for a down payment and closing costs. The median sales price of existing homes in June 2023 was $363,300, according to the National Association of Realtors. This means that a typical 20% down payment would be $72,660, which is more than the annual income of many Americans.
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The $25,000 grant from the Downpayment Toward Equity Act would help first-time home buyers overcome this barrier and make homeownership more accessible and affordable. The grant would cover more than one-third of the typical down payment, or more than half of the minimum down payment required by most conventional loans (5%). The grant could also lower the monthly mortgage payments by reducing the loan amount or the interest rate.
Additionally, the grant would target first-generation home buyers, meaning those whose parents or guardians never owned a home or lost their home due to foreclosure or short sale. These are people who may not have inherited any wealth or assets from their families and may face added challenges in becoming homeowners.
The bill also outlines some eligibility criteria for the first-time homebuyers who want to apply for the grant. They must:
– Have a credit score of at least 580
– Complete a HUD-approved housing counseling program
– Purchase a home that meets FHA standards and does not exceed FHA loan limits
– Use an FHA-insured mortgage or a similar mortgage product that has low down payment requirements and fair interest rates
– Have a debt-to-income ratio of no more than 43%
The bill also specifies that the grant can be used for any type of down payment, closing costs, or other fees associated with buying a home. The grant can also be combined with other federal, state, or local programs that offer down payment assistance.
By providing down payment assistance to first-generation home buyers, especially those from historically disadvantaged groups, the Downpayment Toward Equity Act would help create more fair access to homeownership and wealth creation in the United States.
The bill is currently in the legislative process and has not been passed into law yet. However, it has received support from various organizations and groups that advocate for affordable housing and racial justice, such as the National Association of Realtors, the National Fair Housing Alliance, the National Urban League, and the NAACP.
However, if you need a cash grant today and can’t wait for the Downpayment Toward Equity Act bill Ito pass into law, consider other down payment assistance programs for first-time buyers, including local tax incentives and low-rate, low-down-payment mortgages
Q&A
Q: What is the Downpayment Toward Equity Act of 2021?
A: The Downpayment Toward Equity Act of 2021 is a bill that proposes to create a new program within the Department of Housing and Urban Development (HUD) that would provide grants of up to $25,000 to eligible first-time homebuyers who are from historically disadvantaged communities.
Q: Who is eligible for the grant?
A: To be eligible for the grant, you must be a first-time homebuyer who meets the following criteria:
– You have a credit score of at least 580
– You complete a HUD-approved housing counseling program
– You purchase a home that meets FHA standards and does not exceed FHA loan limits
– You use an FHA-insured mortgage or a similar mortgage product that has low down payment requirements and fair interest rates
– You have a debt-to-income ratio of no more than 43%
– Your income is less than 120% of the area median income
– You are from a socially and economically disadvantaged group, such as Black Americans, Native Americans, Hispanic Americans, or Asian Pacific Americans (in this case, you can get up to $25,000) or you are not from a socially and economically disadvantaged group (in this case, you can get up to $20,000)
Q: How can I use the grant?
A: You can use the grant for any type of down payment, closing costs, or other fees associated with buying a home. You can also combine the grant with other federal, state, or local programs that offer down payment assistance.
Q: How long do I have to live in the home?
A: You have to live in the home for at least five years. If you sell or move out of the home before that period, you may have to repay some or all of the grant amount.
Q: How can I apply for the grant?
A: The grant program is not yet available, as the bill is still in the legislative process and has not been passed into law yet. However, if you are interested in learning more about the bill or finding out if you qualify for the grant, you can visit the official website of the House Financial Services Committee or contact your local HUD-approved housing counselor.
If you are interested in learning more about the bill or finding out if you qualify for the grant, you can visit the official website of the House Financial Services Committee or contact your local HUD-approved housing counselor.
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