$25,000 Downpayment Assistance For First Time Homebuyers
A lot of potential homebuyers have been closely following President Joe Biden's proposed first-time homebuyer tax credit, but the latest draft differs in significant ways.
The published draft version of the legislation called the "Downpayment Toward Equity Act of 2021" does not provide a $15,000 tax credit but rather a $25,000 discount, available at closing.
It also includes several eligibility requirements for a borrower to qualify. For a borrower to qualify for the $20,000 out of the $25,000 discount amount, the borrower must meet all of the following:
1. The borrower must be a first-time homebuyer. It means that the borrower should not have owned a house for at least three years.
2. The borrower must be a first-generation homebuyer. It means that neither of the borrower's parents may have owned a home. This rule 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.
3. The borrower's income must be no more than 120% of the area median income where they live. If the borrower lives in a high-cost area, the income must be no more than 180% of the area median income.
The other $5,000 of the credit is granted to those who are recognized as socially disadvantaged because they are in a group that according to the draft "subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.”
Any individual identifying as Black, Hispanic, Asian American, Native American, or any combination thereof will be presumed to meet this definition. Any individual who does not identify as such will have to prove by a preponderance of the evidence that they are socially disadvantaged.
It is important to take note of the following:
1. The assistance can be used in conjunction with other loan assistance programs.
2. Homebuyers receiving assistance under this act would be required to pay back all assistance they received if they stop occupying their home less than a year after purchase.
Here's the summary of the Downpayment Toward Equity Act of 2021 released by the National Council of State Housing Agencies: https://bit.ly/3gp7bRb