3 Major Updates to Biden’s Home Buyer Assistance Bill

Blog posted On April 27, 2021

Earlier this year, we took A Deeper Look at President Biden’s Proposed Tax Credit. Initially, the tax credit was designed to “help families buy their first homes and build wealth by creating a new refundable, advanceable tax credit of up to $15,000.” However, on April 14^th, lawmakers published a new draft of the Downpayment Toward Equity Act of 2021 that had a few key differences from its original concept.

1. It’s not a tax credit

On the campaign trail, the home buyer assistance plan was advertised as a tax credit. A tax credit typically reduces the amount of money you would have to spend on mortgage interest when you pay your annual federal tax return.

In the current draft of the bill, the home buyer assistance program is categorized as grant funding. Grant funding isn’t like a tax credit. While a tax credit reduces the taxes for qualifying home buyers at the end of the year, a grant would reduce their down payment at the time of closing.

Unlike a tax credit, which would be applied to your annual federal tax return, the grant funds would be distributed at the state level. The funds would initially come from the federal government and be distributed to states based on population, home prices, and other factors. Then, state finance agencies would have the responsibility of distributing the funds.

2. Only certain first-time home buyers qualify

Though the program initially looked like it was going to be a tax credit for all first-time home buyers, it has further restrictions. In order to qualify for the grant, you must:

• Be a first-time home buyer – You can’t currently own a home or have previously owned a home within the past three years.
• Be a first-generation home buyer – Neither of your parents can currently own or previously have owned a home. (However, this limitation doesn’t apply to you if you were in foster care or if your parents lost their home in a foreclosure or short sale.)
• Meet local income limitations – Your income must be below 120% of the area median income or below 180% if you live in a high-cost area.
• Have an eligible property – You must be purchasing a 1-to 4-unit residential property. This includes condos, cooperative projects, or manufactured houses.

3. Qualifying home buyers can receive up to $25,000

In the initial bill proposal, the Biden Administration had mentioned a $15,000 credit. In the current draft, you could receive a base grant of up to $20,000. If you fall within a group that is recognized as socially disadvantaged, you could qualify for an extra $5,000 – totaling at $25,000.

The Downpayment Toward Equity Act of 2021 is currently being discussed and evaluated by the House of Representatives. It comes in the wake of other home buyer assistance programs including the tax credit program enacted by former President George W. Bush and continued by President Obama. Overall, the bill was proposed in order to help narrow the homeownership gap, specifically by assisting first-generation homeowners. In order for this bill to pass, it needs to be approved the House of Representatives and the Senate.

Keep watch for more information on the bill’s progress in the future, and if you’re looking for down payment assistance, let us know. We have many great programs available nationwide and available locally as well.

Sources: HousingWire