Before I even start on the topic, I would like to clear one point. Some websites are mis-representing the fact that this Down payment act of 2021 is for first time homebuyers.
That is not correct!
The draft by House Financial Services Committee, clearly states that this down payment assistance program is for first-generation home buyers. Now going by the book, that means that all First–time homebuyers whose parents or guardians. have never owned a home are considered first–generation homebuyers. On the same note anyone who has not owned a home is last 3 years is considered as a first-time homebuyer. Coming back to the topic.
What Is The Downpayment Toward Equity Act of 2021?
House Financial Services Committee has released a draft for the states to be used for down payment assistance to first-generation home buyers. Under this program homebuyers may receive up to $20,000 in assistance, or $25,000 in assistance if the home buyer qualifies as a “socially and economically disadvantaged individual.” Federal administration of this program will come under the jurisdiction of the Department of Housing and Urban Development (HUD) and state housing finance agency (HFA) will administer the funds on a state level for all participating states.
Lets checkout the points of the draft:
- How much funding has been set aside?
Currently there is not set funding for this assistance program. Congress is authorized to appropriate the necessary funding for next 10 years.
- How the funds can be used?
Funds may only be used to assist eligible home buyers purchase homes, either through down payment assistance, closing cost assistance, or payments to reduce the interest rate on a mortgage.
- Who is an eligible home buyer under the program?
As explained above, down payment assistance under this act can be provided to first-time home buyers who qualify as “first-generation” home buyers.
- Income requirements to qualify for the program
Income for home buyers in low-cost areas should be at or below 120% of the area-median-income (AMI) and those buying in the high-cost area, the homebuyers income must be at or below 180% of the area AMI.
- Which mortgage programs qualify for the Act?
This assistance program can be used to purchase any home bought with a mortgage that
- Do you have to refund this amount?
Well, yes if you plan not to live in the home for more than a year then you will have to pay the full amount back. If you continue to live in the home, then this assistance amount will waive off 20% every year, means after 5 years you will not have to pay anything back. One more thing if you sell the home in loss due to some unforeseen reasons, then the penalty will be waived off to that extent.
Still not clear? Lets get in touch and we will explain you all about this down payment assistance program.