“Downpayment Toward Equity Act of 2021” from Origination Pro & Housing Wire
Consumers have been closely following President Joe Biden’s proposed first-time homebuyer tax credit, but the newest form of that proposal has several significant restrictions. The latest 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. Recently, lawmakers published a draft version of the legislation, the “Downpayment Toward Equity Act of 2021*.”
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. 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 would dole out funds to states based on population, median area home prices and racial disparities in homeownership rates. State finance agencies would be tasked with administering the program and distributing the funds. But they could delegate that responsibility to community-based nonprofit entities, such as community development financial institutions, minority depository institutions, housing counseling agencies or community development credit unions.
This would not be the first time the federal government has given first-time homebuyers a boost. A Bush-era program, the first-time homebuyer tax credit, allowed borrowers to claim a credit on their income taxes. The Obama administration continued the program until 2010. In order for such a bill to pass, it would have to clear significant hurdles in both houses of Congress. If it were included in a larger infrastructure bill, that process would be slightly abbreviated. Political sources say the draft version is a starting point for discussion.
*The Downpayment Toward Equity Act of 2021 has not been introduced on the floor and has no number.