At some point during the home purchase process, you’ll likely search for down payment assistance for first-time homebuyers. After all, the down payment is usually the biggest barrier to homeownership. First-time home buyers often feel they either don’t have enough funds to put down, or they just let saving for a down payment completely deter them from even getting started on the path to homeownership. That’s where down payment assistance can be a benefit.
On a mission to promote homeownership, lawmakers are currently evaluating three pieces of legislation that could have significant benefits for first-time homebuyers. These programs are not guaranteed to pass in their current form and would likely look very different from what’s currently proposed. Yet, it’s worth keeping an eye out for what these initiatives would mean for first-time buyers as they indicate a turn toward a national conversation about the accessibility of homeownership and closing the gap in wealth between renters and homeowners.
Here’s what we know so far.
The First-Time Homebuyer Act of 2021
This legislation would provide a tax credit of $15,000, or up to 10% of a home’s purchase price, to eligible first-time home buyers. This program aims to get more renters into homes and close the wealth gap between renters and homeowners in the post-forbearance world, where equity for homeowners is at a high and rent continues to rise higher and higher. In some cases, renters may even pay a lower monthly payment for a mortgage than their current rent, all while building equity and, ultimately, their net worth.
The assistance provided by this act would be available come tax time during the following tax year. However, according to the website of U.S. Congressman Earl Blumenauer (D-OR), who introduced the bill, “Taxpayers may elect to treat the purchase of their home as occurring in the prior taxable year to receive the credit sooner.”
While not finalized, specifics regarding eligibility requirements and other program elements are still being discussed in Congress. Expect negotiations to change the final version of this act should it eventually be signed into law. Still, the current version has some very attractive options for down payment assistance for first-time homebuyers.
The DASH Act
Another impressive piece of legislation currently being negotiated is the “Decent, Affordable, Safe Housing for All (DASH) Act. This would also give a $15,000 tax credit to those who qualify as first-time home buyers. Some programs allow you to qualify if you haven’t owned a home in 3 years or more – however, to qualify for the DASH Act, you must have never owned a home before at all and plan to live in the home you purchase.
Unlike certain statewide programs that offer financial incentives to qualified buyers, this bill has income limits in place to make sure the funds go to home buyers who are in the most need of assistance.
Here’s what eligibility could look like:
- The down payment credit could cover up to 20% of the home price, max of $15,000.
- Your new home must be lived in as a primary residence.
- Not available if you earn above $100,000 a year.
- Not available if you earn more than $150,000 a year for those filing as head of household.
- Not available if you earn more than a total of $200,000 if filing jointly.
Also, you’re expected to observe a five-year taxable holding period, so be prepared to live in the property for at least five years. If you move within those five years, you’re expected to repay the tax credit. Every year you spend outside of the property comes with a decreased amount owed. Your tax professional can guide and advise you on the best way to take advantage of this program if passed.
The Down Payment Toward Equity Act of 2021
If you’re a first-generation and first-time homebuyer, this one’s for you. Congress is currently evaluating a grant of $25,000 of down payment assistance for first-time homebuyers. The best part is that this is not a tax credit; it’s a grant. If passed, this money would be available to eligible buyers at the closing and would not have to be repaid if the buyer remains in the home for at least five years.
In total, the bill would give $20,000 in down payment assistance and another $5,000 of assistance for individuals deemed “socially disadvantaged,” as determined by ethnic, economic, or other objective factors. If passed, renters who have previously struggled with barriers to buying a home will have a huge advantage to start building wealth through homeownership.
If you meet the first generation requirement, have not purchased a home in the past three years, and meet the income guidelines, then this is something to keep an eye on.
You don’t need to wait to make homeownership affordable
I regularly work with first-generation and first-time homebuyers to help them begin building wealth through homeownership. While these three pieces of legislation have some very attractive components, they are still in the early stages and have no guarantees of passing. If you’re ready to jump into homeownership and don’t want to wait to see if this down payment assistance for first-time homebuyers is passed, then I can give you some options you may qualify for right now. From government-backed home loans to credit-building strategies, I know how to get you on the pathway to homeownership. My website makes it easy to see what you qualify for – check it out today or contact me for one-on-one guidance through the entire process.