Consumers have been closely following President Joe Biden’s proposed first-time homebuyer tax credit, but the latest legislative effort to assist homebuyers differs in several significant ways. The newest draft of a down-payment assistance bill would provide $25,000 to first-time homebuyers, but only those who are also first-generation homebuyers and economically disadvantaged. Plus Biden’s proposal is not actually a homebuyer tax credit, but it is money that would be available at closing.
On Wednesday, lawmakers published a draft version of the legislation, the “Downpayment Toward Equity Act of 2021,” ahead of a hearing held by the U.S. House Committee on Financial Services, which Rep. Maxine Waters chairs. During the hearing, lawmakers discussed a number of housing measures on the table in President Biden’s infrastructure package, including funding to shore up public housing.
The proposed down payment assistance 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 median income where they live — or if they live in a high-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 “subjected to racial or ethnic prejudice,” could receive an additional $5,000.
The grant funding — which is not a tax credit — could be used at closing toward a downpayment on a residential property with one to four units, including a condominium, cooperative project or manufactured housing unit.
The program, which is currently being discussed in the House of Representatives, would dole out funds to states based on population, median area home prices and racial disparities in homeownership rates.