Bill proposes up to $25K for some first-time homebuyers, but it hasn’t passed

Becoming a first-time homebuyer is often an exciting process, but it can seem like an unattainable goal for many people, especially Millennials and Gen Zers. A 2023 Redfin survey found affordability is the number-one barrier to homeownership for younger Americans.

In the past year, multiple Reddit users have asked about a federal grant program appearing to offer up to $25,000 to help first-time homebuyers with down payments and other costs. A VERIFY reader recently asked us if this program is currently available.

THE QUESTION

Is there a $25,000 federal grant currently available to first-time homebuyers?

THE SOURCES

• Downpayment Toward Equity Act
• U.S. Committee on Financial Services
• National Council of State Housing Agencies (NCSHA)
• The White House
• Bankrate
• The Mortgage Reports

THE ANSWER

No, a $25,000 federal grant is not currently available to first-time homebuyers.

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WHAT WE FOUND

The federal government is not currently offering $25,000 grants to first-time homebuyers. A proposed bill known as the Downpayment Toward Equity Act would give up to $25,000 in grant money to first-time, first-generation homebuyers who meet certain eligibility requirements, but Congress hasn’t passed it.

The Downpayment Toward Equity Act, which is often referred to as the “first-time homebuyer grant,” was created to help close the U.S. racial homeownership gap by providing $100 billion in direct assistance to help first-time, first-generation homebuyers. It was first introduced in the House by Rep. Maxine Waters (D-CA) in 2021, but it did not make it out of committee after a vote.

If the bill were to become law, a grant program would be established by the Department of Housing and Urban Development (HUD) and administered by states to help eligible individuals purchase their first homes. Bankrate says the program is particularly aimed at helping “socially and economically disadvantaged homebuyers,” including those within the Black, Hispanic, Native American and Asian American communities. However, any eligible first-time, first-generation homebuyer would have access to the funds.

The U.S. Committee on Financial Services says up to $20,000 of the grant money would go to first-generation homebuyers, while “socially and economically disadvantaged homebuyers” could get up to $25,000. The funds could be put toward down payments, closing costs or help with lowering mortgage interest rates. The eligibility requirements are listed below:

• Must be a first-time homebuyer. You can’t have owned a home or co-signed a mortgage in the past three years.
• Must be a first-generation homebuyer. Your parents, legal guardians, spouse or domestic partner can’t have owned a home in the past three years. If you were ever placed in foster care and meet the income requirements, you’d also be considered a first-generation homebuyer.
• Must meet certain income limits. Your income can’t equal more than 120 percent of the median income in the area in which you’re buying the home or the area in which you currently live. In higher-cost areas, that limit would be higher.
• Must complete housing counseling. You’ll need to participate in a HUD-approved housing counseling program or a homebuyer education course if counseling isn’t available in the time frame you’re buying the home.
• Must live in the home for at least five years. You’ll need to live in the home you buy with the grant money for at least five years or you might need to repay some or all of the funds, depending on how soon you move out or sell.
• Eligible mortgage types: You can use the grant money if you’re getting a conventional loan financed by Fannie Mae or Freddie Mac, an FHA loan, a VA loan, a USDA loan, a Section 184 loan or any other loan considered a qualified mortgage.
• Eligible property types: You are eligible for the funds if you’re buying a single-family detached home, condo, co-op or manufactured home, as well as a multifamily home, up to four units, as long as you’re living in one of those units.

Waters re-introduced the bill in 2023, and a version of it was included in President Joe Biden’s proposed budget for fiscal year 2024. However, at this time, it’s unclear if or when the bill will be passed by Congress.

Although the Downpayment Toward Equity Act has not been passed, some states, including Arkansas, Colorado, Georgia and Utah, offer down payment assistance grants or loans to first-time homebuyers who meet certain eligibility requirements. Visit the HUD website to find out more about homebuying programs in your state.