A Bill That Could Help First-Home Homebuyers with a Downpayment – the Details

By Rachel Puryear

As always, coming up with a downpayment is a major sticking point for many in owning a home. Proposed federal legislation – if passed – could give some first-time buyers a downpayment boost.

The Downpayment Toward Equity Act of 2021 would offer at least $20,000.00 of downpayment grant assistance to qualifying buyers. Those qualifying buyers who also belong to groups “subjected to racial or ethnic prejudice” could receive an additional $5,000.00 (for a total of $25,000.00).

Fair Housing logo – house shape with “equal” sign, and “Equal Housing Opportunity” written below.

To qualify, a buyer must:

  • Not have owned a home in the previous three years.
  • Not make more than 120% of the median income in their area, or more than 180% if they live in a high-cost area.
  • Neither of their parents owned a home – EXCEPT where the parents lost their home in a foreclosure or short sale, or the buyer has ever been in foster care.

The grant funds could be used at closing towards downpayment on residential property (1-4 units, can include a condo or townhouse or manufactured home).

This could bring a lot of potential home buyers closer. It still does not overcome housing supply shortage, which continues to drive up housing prices and create a fiercely competitive housing market. In pricy areas like the Bay Area, even $25,000.00 will still leave plenty of onus on buyers to come up with the rest. But it’s a start.

Also notable is the Biden administrations’s proposal of a (up to) $15,000.00 homebuyer tax credit – now a bill currently before Congress – known as the “First-Time Homebuyer Act”. If passed, this legislation would provide first-time homebuyers (defined as not having owned or purchased a home within the previous three years) with a tax credit of up to 10% of the purchase price, capped at $15,000.00. Eligible participants would make no more the 160% of the median income in their area, and purchase a home for no more than 110% of the area’s median purchase price, and use the home as a primary residence for at least four years. Again, given that just about anything in the Bay Area costs a lot more than the $150,000.00 it would take to reach the tax credit’s cap, the effect of offsetting some of the purchase price through a tax credit could be fairly minimal here. But, perhaps every little bit helps. In any event, this bill is something to watch in the coming weeks.

As always, dear readers, thank you for reading, following, and sharing. Best to you.

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