Biden’s First-Time Buyers $25,000 Downpayment Toward Equity Act 2021
Mar 20, 2023
Mike Romano is a mortgage industry veteran with over 20 years of experience. His expertise spans mortgage technology, credit risk, and loan origination, and he has spoken at many mortgage and fintech conferences. He has a Bachelor's and MBA from the University of California, Berkeley and currently resides in Austin, TX. NMLS # 2515901
The down payment — that big, intimidating chunk of money you’re required to pay up front when you buy a home — is the biggest barrier to first-time home ownership for most people. A recent Biden down payment assistance program aims to help first-time home buyers get over that hump and into a home.
At Stairs, our entire mission is to put homeownership within reach by helping first time homebuyers get the down payment assistance they need. We hear a lot of questions about the $25,000 Downpayment Toward Equity Act of 2021, so we figured it was time to lay all of the information out in one easy-to-use guide.
In this guide, we cover all the vital details of Biden’s first time buyers $25,000 Downpayment Toward Equity Act of 2021. You’ll learn the eligibility requirements, what costs you can cover with Biden down payment assistance funds, and how to get the grant.
Learn about all your down payment assistance options
Technically, the Down Payment Toward Equity Act of 2021 isn’t law yet. But you might not have to wait: there are plenty of other down payment assistance programs available to first-time home buyers.
Find up to $15,000 towards a home 🏠
Compare local down payment assistance and find a mortgage, fast.
Disclaimer: This article is for informational purposes only and should not be considered as legal or financial advice. Please consult an attorney, mortgage lender, or CPA for guidance on your specific situation.
What is Biden’s $25,000 Downpayment Toward Equity Act of 2021?
Biden’s $25,000 Downpayment Toward Equity Act of 2021 is a grant for first-time home buyers. The grant offers up to $25,000 to help cover down payments, closing costs, and interest. The money is not a tax credit or a loan, and it does not need to be repaid as long as you don’t sell the house for at least five years.
The Downpayment Toward Equity Act is designed to help people purchase their first home. Downpayment Toward Equity Act funds cannot be used to purchase a second home or a rental property. Additionally, home buyers in the household must meet all the eligibility requirements, which we’ll go over shortly.
Is the Downpayment Toward Equity Act available yet?
Currently, the Downpayment Toward Equity Act is still in the process of being approved in the House and Senate. The bill has 64 co-sponsors in the house and six co-sponsors in the senate.
This is the timeline for both bills up to now:
- July 17, 2021: Downpayment Toward Equity Act of 2021 introduced in the House of Representatives, labeled H.R. 4495.
- September 30, 2021: Downpayment Toward Equity Act of 2021 introduced in the Senate, labeled S. 2920.
- February 10, 2022: Senate hearings for S. 2920.
- June 22, 2022: Senate hearings for S. 2920.
Unfortunately, Downpayment Toward Equity Act grants are not available until the bill becomes law. In the meantime, there are other down payment assistance programs currently available to first time home buyers.
With Stairs, you can easily search for the down payment assistance programs that will help you buy a home on your own timeline.
Home affordability just got easier with Stairs
With Stairs, you can easily find all of the down payment assistance programs you qualify for, compare your options in one place, and connect to a trusted lender familiar with your chosen program.
Learn more about your down payment assistance options.
Will Biden’s $25,000 grant be good news for first-time home buyers?
In short, yes. At the very least, Biden’s grant adds to the pool of potential down payment assistance options for first-time home buyers.
The Down Payment Toward Equity Act is especially useful for financially disadvantaged buyers and first time buyers who have no history of home ownership in their family.
The bill has eligibility requirements that ensure the funds are exclusively available to first time home buyers who are in the most need of assistance, which is great news if you meet the eligibility criteria.
Learn more: There are other bills in the works intended to help first-time homebuyers. Read our explanation of Biden’s $15,000 first-time homebuyer tax credit.
Who is eligible for the grant?
To be eligible for Biden’s $25,000 first-time homebuyers grant, you must be of moderate income, a first-time home buyer, and a first-generation home buyer (with some exceptions). You must also complete a homeownership class, and your mortgage loan must be backed by one of the five government mortgage agencies.
Be mindful that these requirements may change before the act is passed into law. However, these are the current proposed eligibility requirements for Downpayment Toward Equity Act grants.
Here are the details on each requirement:
First-time home buyer
You must be a first-time home buyer to qualify for the grant, but only technically. The bill requires that you must not have owned a home or co-signed for a mortgage loan within the last 36 months.
If you once owned a house, but haven’t owned in at least three years, you’re still considered a first-time home buyer for the purposes of Downpayment Toward Equity Act eligibility.
Most down payment assistance programs have a similar definition of “first-time homebuyer”.
First-generation home buyer
As the name suggests, a major goal of the Down Payment Toward Equity Act is to reach groups that have historically been left out of home ownership, and to reduce some of the inequities that make it difficult for many first-time home buyers to purchase a home.
As such, grant applicants’ parents or legal guardians may not have owned a home during the applicant’s lifetime.
The only exception is if the grant applicant’s parents or legal guardians lost their home to foreclosure or short sale and do not currently own. This eligibility requirement also does not apply to home buyers who previously lived in foster care.
Moderate income household
To qualify for a Downpayment Toward Equity Act grant, your income must be 120% or less of the area median income (AMI) in the place where the home is located.
If you want to calculate the Downpayment Toward Equity Act income limits in your area, multiply the area median income (based on your household size) by 1.2:
Median income x 1.2 = grant eligibility income limit
There are exceptions for especially high cost of living areas such as San Francisco, Los Angeles, and New York. In areas deemed high cost, the income limit for grant funds is 180% of the area median income.
Median income x 1.8 = income limit for high cost of living areas
Mortgage loan backed by one of five government agencies
Only loans backed by one of the five government mortgage agencies are eligible for Downpayment Toward Equity Act grants. To qualify, your loan must be backed by one of the following:
- Fannie Mae
- Freddie Mac
- Department of Veterans Affairs (VA)
- Federal Housing Administration (FHA)
- United States Department of Agriculture
Complete a homeownership class
Grant applicants must complete a government-approved home ownership course.
Typical courses can be completed in about 90 minutes. Although this might seem like an unnecessary hoop to jump through, homeownership classes have shown to reduce mortgage default rates, which is why the DownPayment Toward Equity Act requires it.
Learn more: Area median income varies depending on your location, and so does the cost of owning a home. Read our top picks for the cheapest state to buy a house in 2023.
How does the Downpayment Toward Equity Act Work?
The standard Downpayment Toward Equity Act grant is $20,000. Buyers from historically disadvantaged groups qualify for an additional $5,000. The money is given as a cash payment applied to the purchase transaction at the time of closing. The money can be divided among various home purchase costs as the buyer sees fit.
Qualifying for the additional $5,000 for disadvantaged groups
To qualify for the additional $5,000 for historically disadvantaged groups, a home buyer must identify as Black, Hispanic, Asian American, Native American, or any combination of these.
This eligibility standard also includes other “socially disadvantaged individuals” who have been “subject to racial or ethnic prejudice or cultural bias because of their membership in a group, without regard to their individual character”.
Using the grant for home purchase costs
Regardless of whether you get a $20,000 or a $25,000 grant, you can use the money to pay for nearly anything related to the home purchase. The grant can also be split among multiple different costs.
For example, a $25,000 could be used like this:
- $15,000 for down payment costs.
- $3,000 to cover real estate and closing costs.
- $7,000 to make accessibility renovations to the home.
Will I have to pay back Biden’s $25,000 first-time homebuyer grant?
If you live in the purchased home for at least five years, you will not be required to pay back any of Biden’s $25,000 first-time homebuyer grant. If you move or sell the house within five years, you will be required to pay back a portion of the grant based on how long you lived in the house before moving or selling.
This is the repayment schedule for those who do sell their home or change residences within five years:
- Sell or move within five years: Repay 20% of the grant ($4,000 or $5,000)
- Sell or move within four years: Repay 40% of the grant ($8,000 or $10,000)
- Sell or move within three years: Repay 60% of the grant ($12,000 or $15,000)
- Sell or move within two years: Repay 80% of the grant ($16,000 or $20,000)
- Sell or move within one year: Repay 100% of the grant ($20,000 or $25,000)
If you live in the home for five years or longer, you will not be required to pay back the grant at all.
Are there other down payment assistance programs I can get?
Yes, there are many down payment assistance programs which are available right now. A number of nonprofits and mortgage lenders, as well as federal, state and local government agencies offer down payment assistance, especially to first-time home buyers.
The trouble is that it’s difficult to find and compare down payment assistance programs. All the information is scattered, which makes it nearly impossible to compare down payment assistance programs side-by-side.
Stairs solves this problem. Stairs brings all the information about down payment assistance programs into one place, allowing you to easily see which programs you qualify for, and to compare those programs side-by-side.
Stairs even connects you with mortgage lenders that accept your specific down payment assistance program, so you can get approved as quickly and easily as possible. Learn more about how Stairs can help you get down payment assistance.
Frequently asked questions FAQ
Here are some quick answers to the most commonly asked questions about Biden’s $25,000 first-time homebuyers grant.
How do I apply for the $25,000 Home Buyer Grant?
As of right now, you can’t apply for the Downpayment Toward Equity Act grant, because it’s not law, yet.
The details aren’t completely ironed out, but as the bill is drafted right now, you won’t have to apply for the grant at all. Your lender will file a request based on the information in your loan application. As long as you qualify for the grant, the funds will be disbursed automatically when your home sale closes.
How do I know if I qualify for the $25,000 grant?
You qualify for the first $20,000 of the $25,000 grant, you must meet these criteria:
- You haven’t owned a home within the last three years.
- Your parents or legal guardians didn’t own a home within your lifetime.
- OR: Your parents/legal guardians foreclosed on a home and don’t currently own.
- OR: You were in foster care.
- Your income is no more than 120% area median income (180% for high-cost areas.)
- Your mortgage is backed by Fannie Mae, Freddie Mac, VA, FHA, or USDA.
- You complete a government approved homeownership course.
To qualify for the remaining $5,000 (for a total grant of $25,000, you must also:
- Identify as Black, Hispanic, Asian American, Native American, or as a member of another group which has been subject to cultural bias without regard to their individual character.
Stairs can help you quickly determine if you are eligible for Biden’s down payment assistance grant, as well as other down payment assistance programs.
Can I get the $25,000 Biden grant if my partner already owns a home?
All buyers in the purchase transactions must not own a home or have owned a home within the last three years to be eligible for the Downpayment Toward Equity Act grant. Therefore, you would not be eligible if your partner currently owns a home.
Is Biden’s first-time home buyers grant available yet?
As of right now, the Downpayment Toward Equity Act is still being considered in the House and the Senate, and grant funds are not yet available.
How will I know when the act becomes law?
When you sign up for the Stairs early access mailing list, we’ll let you know as soon as the Biden down payment assistance program goes into effect.
If a better down payment assistance program exists, and this program can help you get into a home even sooner, we’ll let you know about this as well.
Is the $25,000 Down Payment Toward Equity Act of 2021 the same as the $15,000 Biden first-time home buyer tax credit?
No. The $25,000 Down Payment Toward Equity Act provides grant funds, which are applied to home buying costs when the sale is completed. The Biden $15,000 tax credit reduces your tax burden for the year. This gets applied to your next tax filing.
Can Stairs Financial help me find additional down payment assistance programs?
Stairs Financial connects you to qualified lenders who work with all the down payment assistance programs you might qualify for, then lets you compare your options side-by-side.
With Stairs, you can easily find out exactly which down payment assistance programs are available to you, so you can make a more informed decision.
Find up to $15,000 towards a home 🏠
Compare local down payment assistance and find a mortgage, fast.
Lattice Thinking, Inc. All rights reserved. Lattice Thinking, Inc is a mortgage broker that does business under the business name Stairs Mortgage. Lattice Thinking, Inc is not a mortgage lender and, therefore, does not make residential mortgage loans.
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