What is The $25,000 Downpayment Toward Equity Act? [Explained]

First-time home buyers could soon get a $25,000 cash grant to help purchase a home.

The program, called The Downpayment Toward Equity Act, is part of an effort to provide down payment assistance to help Americans buy quality housing.

Originally introduced as the Downpayment Toward Equity Act of 2021, the bill expired. However, after President Biden’s 2024 budget set aside $100 billion for a homebuyer grant program, the bill was reintroduced in early 2023.

On June 21, 2023, lawmakers reintroduced the $25,000 grant for first-time home buyers as H.R. 4231: The Downpayment Toward Equity Act of 2023. It was later mentioned in the 2024 State of the Union address.

The Downpayment Toward Equity Act aims to provide down payment assistance to first-generation homebuyers, helping to close racial wealth and homeownership gaps in the U.S.

In simpler terms, the government wants to give first-time, first-generation buyers cash grants to make homeownership more accessible.

This article breaks down the Downpayment Toward Equity Act, explaining who qualifies, how to apply for the grant, and when it could become law.

What Is The Program’s Current Status?

As of November 20, 2024, the $25,000 first-time home buyer grant program is still a bill with the 2023-2024 Congress.

Rep. Maxine Walters introduced The Downpayment Toward Equity Act of 2023 on June 21, 2023, as H.R. 4231. Sen. Rafael Warnock introduced a corresponding bill in the Senate as S.3930 on March 12, 2024.

The Downpayment Toward Equity Act Timeline

Date	Action Taken
July 17, 2021	H.R. 4495 introduced as Downpayment Toward Equity Act of 2021
September 30, 2021	S. 2920 introduced as Downpayment Toward Equity Act of 2021
February 10, 2022	Hearings held in Senate
June 22, 2022	Hearings held in Senate
March 9, 2023	White House budget allocates $175 billion for affordable housing programs, including $10 billion for cash grants for first-time home buyers
June 21, 2023	H.R.4231 introduced as Downpayment Toward Equity Act of 2023
July 6, 2023	31 members of the House of Representatives co-sponsor the bill
September 14, 2023	4 additional members of the House of Representatives co-sponsor the bill
March 12, 2024	S.3930 introduced as Downpayment Toward Equity Act of 2024

Home buyers cannot claim Downpayment Toward Equity grant money until the bill passes into law.

Until then, buyers can consider the Conventional 100 mortgage which provides 100% financing plus closing costs for first-time buyers with reduced mortgage interest rates.

What is the Downpayment Toward Equity Act of 2024?

The Downpayment Toward Equity Act provides eligible first-time home buyers up to $25,000 cash for down payment on a home, closing costs on a mortgage, interest rate reductions via discount points, and other home purchase expenses.

As of November 20, 2024, the program requires that home buyers:

• Be a first-time home buyer
• Earn a low- or moderate income consistent for their area
• Buy a home that will be a primary residence
• Use a government-backed mortgage
• Be a first-generation home buyer, have parents or legal guardians who defaulted on a home loan, or lived in foster care during their lifetime

The Downpayment Toward Equity Act may not be used to purchase a second home or rental property, and all home buyers within the household must meet the program’s eligibility requirements.

Why Is This $25,000 Grant Important for First-Time Home Buyers?

The Downpayment Toward Equity Act is built so first-time home buyers can purchase homes, grow roots, and increase their household wealth.

The Downpayment Toward Equity Act would also reduce racial disparity.

Real estate holds $21 trillion in value, making home equity the largest wealth source in the United States.

Today, homeowners are overwhelmingly white. The homeownership gap between white and Hispanic households is currently 25 percentage points, and the difference between white and black households is currently 30 percentage points.

The Downpayment Toward Equity Act would level the playing field for disadvantaged groups. It reminiscent of housing legislation in the 1968 Fair Housing Act and Housing & Urban Development Act.

The program makes homes more affordable to disadvantaged buyers and incentivizes long-term homeownership.

Who Is Eligible For The Downpayment Toward Equity Act?

The Downpayment Toward Equity Act is not yet law, so when we discuss the bill’s eligibility requirements, we must add a caveat that the bill’s language is not final and may change before passage into law.

As of November 20, 2024, the Downpayment Toward Equity Act requires that home buyers meet the following requirements:

Must be a first-time home buyer

Eligible home buyers must not have owned a home or co-signed on a mortgage loan within the last thirty-six months. Renters who owned homes more than three years ago qualify as first-time home buyers.

Must be a first-generation home buyer or have lived in foster care

Eligible home buyers’ parents or legal guardians may not have owned a home during the 36 months prior to purchase. This requirement is waived for all home buyers who previously lived in foster care.

Must earn moderate income or lower

Eligible home buyers must earn an income that’s no more than 20 percent over the median income for a metropolitan area. For example, in Orlando, Florida, where the median income is $80,100, home buyers must earn $96,120 per year or less to claim their cash down payment grant.

Income exceptions are made in high-cost areas, such as New York, Los Angeles, and other cities where the cost of living is high.

In high-cost areas, eligible home buyers must earn an income no more than 80 percent above the area median income. In San Francisco, the 2023 area median income is near $166,600. Therefore, to get access to the government’s $25,000 cash grant, home buyers must earn $299,880 annually or less.

Must use a mortgage backed by Fannie Mae, Freddie Mac, FHA, VA, or USDA

Eligible home buyers must use a mortgage backed by one of the five government mortgage agencies – Fannie Mae, Freddie Mac, FHA, VA, and USDA. These entities allow for no down payment (USDA and VA), 3 percent down payment (Fannie Mae and Freddie Mac), and 3.5 percent down payment (FHA).

Jumbo mortgages are ineligible for the program, along with other non-qualifying mortgage loans.

Must complete an online or in-person homeownership class

The Downpayment Toward Equity Act requires home buyers to complete a government-approved homeownership education course. Courses can be completed in 90 minutes and are proven to reduce mortgage default rates.

How Does the Downpayment Toward Equity Act Work?

The Downpayment Toward Equity Act is a cash grant for first-time home buyers. It’s neither a loan nor a tax credit. It’s a cash payment made to eligible buyers at closing to be directly applied to the purchase transaction.

The standard cash award for first-time home buyers is twenty-thousand dollars, and an additional five thousand dollars is available to “socially disadvantaged individuals.”

According to the bill, a socially disadvantaged individual is anyone who identifies as Black, Hispanic, Asian American, Native American, or any combination thereof, or who has been 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.

Eligible home buyers can use the money for anything purchase-related.

For example, your $25,000 cash grant can be split into a down payment, a lump sum for closing costs, and cash to buy down your mortgage interest rate.

• $20,000 to make a down payment on your home
• $3,000 for your real estate and title closing costs
• $2,000 to buy mortgage discount points

You can also use the first-time buyer cash grant to make accessibility renovations to your home.

If You Move Within 5 Years, You’ll Pay Some Money Back

The Downpayment Toward Equity Act promotes a long-term view of homeownership.

The bill requires homeowners to live in their homes for five years. Buyers who change residence or sell within 60 months forfeit a portion of their initial cash grant.

• Sell or move within Year 1: Repay 100% or $25,000
• Sell or move within Year 2: Repay 80% or $20,000
• Sell or move within Year 3: Repay 60% or $15,000
• Sell or move within Year 4: Repay 40% or $10,000
• Sell or move within Year 5: Repay 20% or $5,000

There are exceptions to the repayment rule for military deployment and other hardship circumstances. Your mortgage lender can explain your options.

How To Receive Your $25,000 Down Payment Grant

When the Downpayment Toward Equity Act passes into law, cash grants will be automatic payments sent to your settlement or escrow. Your mortgage lender will facilitate the grant and complete your necessary forms.

Your cash grant will be waiting for you on your closing day.

However, if you need a cash grant today and can’t wait for the Downpayment Toward Equity Act bill Ito pass into law, consider other down payment assistance programs for first-time buyers, including local tax incentives and low-rate, low-down-payment mortgages.

Will the Downpayment Towards Equity Act Become Law?

The Downpayment Toward Equity Act is unlikely to pass into law before the late-2024 because getting cash grants to home buyers requires multiple government agencies to coordinate, and the congressional budget isn’t passed into law.

Once it’s passed, Congress must make the rules by which the federal government distributes grants to states and how the states distribute money to local title companies. Those rules are required before the first cash grant can be made.

The bill also requires rules for privacy protection and reporting.

Questions First-Time Buyers Ask About The $25,000 First-Time Home Buyer Grant

Since publishing the article’s first version in 2021, Homebuyer.com readers have asked a lot of questions about the Downpayment Toward Equity Act. Here are some of the common ones.

We also maintain a separate list of first-time home buyer tips and questions worth checking out.

If your question doesn’t appear in this list, use the chatbox and ask us live.

What changed with the Downpayment Toward Equity Act of 2023 from the Downpayment Toward Equity Act of 2021?

The 2023 version of the Downpayment Toward Equity Act simplifies the definitions of first-time home buyer and first-generation home buyer, and proposes a need-based allocation of cash grants to states. Beyond that, the current and former versions of the bill are mostly the same.

Is the $25,000 First-Time Home Buyer Grant the same thing as the $15,000 Biden First-Time Home Buyer Tax Credit?

No. The $15,000 Biden First-Time Home Buyer Tax Credit gives a federal tax credit to eligible home buyers, which can be paid as cash or applied at closing as downpayment assistance.

Read more about the $15,000 First-Time Home Buyer Tax Credit.

How do I apply for the $25,000 Home Buyer Grant?

You won’t need to apply when the $25,000 Downpayment Towards Equity Act passes. Your mortgage lender will use the information in your loan application to file your request and activate your disbursement. The grant will await you at your closing.

How do I know if I earn too much for the Downpayment Toward Equity Act?

To determine whether your household income is within tolerance for the Downpayment Toward Equity Act, use this government lookup for your area and multiply the result by 1.2. If your income is at or below that figure, you may be eligible for $25,000.

If I have to move for work during the first five years, do I have to repay the $25,000 grant?

Yes, if you move or sell your home within five years of using the program, you’re required to pay back at least some of your grant. Your employer may reimburse you as part of your moving expenses.

If I’m a first-time home buyer, my fiancee is not a first-time home buyer. Can we use the $25,000 First-Time Home Buyer Grant?

No, to use the $25,000 First-Time Home Buyer Grant, all home buyers must be first-time buyers who meet the program’s eligibility standards.

Learn more about what is a first-time home buyer.

Are there restrictions on how I use my first-time home buyer grant money?

Yes, you may use grant funds to make a down payment on a home, pay closing costs, reduce your mortgage interest rate, or other home purchase-related expenses only.

Will the $25,000 Downpayment Toward Equity Act pass into law before The HELPER Act?

The HELPER Act, for which the official title is “Homes for Every Local Protector, Educator, and Responder Act”, is a no-money-down, no mortgage insurance program for teachers, law enforcement officials, and firefighters. We expect the HELPER Act would pass into law sooner.

Can I combine the $25,000 Downpayment Toward Equity Act with other first-time home buyer bill?

Yes, eligible home buyers can stack the Downpayment Toward Equity Act with other available buyer programs including The HELPER Act mortgage, the $15,000 First-Time Home Buyer Tax Credit, the DASH Act, the $10,000 First-Time Home Buyer Mortgage Relief Credit, and more.

Who is the primary sponsor of the Downpayment Toward Equity Act of 2023?

Rep. Maxine Waters (D-CA-43) is the primary sponsor of H.R.4231 in the 118th Congress, and Sen. Rafael Warnock is the primary sponsor in the Senate.

Who are the Downpayment Toward Equity Act of 2023 co-sponsors?

As of November 20, 2024, there are 57 co-sponsors of H.R.4231 in the House.

Representative	Affiliation	Sponsor Date
Rep. Green, Al	[D-TX-9]*	06/21/2023
Rep. Garcia, Sylvia R.	[D-TX-29]*	06/21/2023
Rep. Pressley, Ayanna	[D-MA-7]*	06/21/2023
Rep. Vargas, Juan	[D-CA-52]	07/06/2023
Rep. Bonamici, Suzanne	[D-OR-1]	07/06/2023
Rep. Cleaver, Emanuel	[D-MO-5]	07/06/2023
Rep. Moore, Gwen	[D-WI-4]	07/06/2023
Rep. McGovern, James P.	[D-MA-2]	07/06/2023
Rep. Torres, Ritchie	[D-NY-15]	07/06/2023
Rep. Pocan, Mark	[D-WI-2]	07/06/2023
Rep. Meeks, Gregory W.	[D-NY-5]	07/06/2023
Rep. Williams, Nikema	[D-GA-5]	07/06/2023
Rep. Lynch, Stephen F.	[D-MA-8]	07/06/2023
Rep. Kamlager-Dove, Sydney	[D-CA-37]	07/06/2023
Rep. Tlaib, Rashida	[D-MI-12]	07/06/2023
Rep. Carbajal, Salud O.	[D-CA-24]	07/06/2023
Rep. Beatty, Joyce	[D-OH-3]	07/06/2023
Rep. Johnson, Henry C. “Hank,” Jr.	[D-GA-4]	07/06/2023
Rep. Smith, Adam	[D-WA-9]	07/06/2023
Rep. Meng, Grace	[D-NY-6]	07/06/2023
Del. Norton, Eleanor Holmes	[D-DC-At Large]	07/06/2023
Rep. McGarvey, Morgan	[D-KY-3]	07/06/2023
Rep. Pettersen, Brittany	[D-CO-7]	07/06/2023
Rep. Gomez, Jimmy	[D-CA-34]	07/06/2023
Rep. Horsford, Steven	[D-NV-4]	07/06/2023
Rep. Scanlon, Mary Gay	[D-PA-5]	07/06/2023
Rep. Crockett, Jasmine	[D-TX-30]	07/06/2023
Rep. Schiff, Adam B.	[D-CA-30]	07/06/2023
Rep. Jackson, Jonathan L.	[D-IL-1]	07/06/2023
Rep. Omar, Ilhan	[D-MN-5]	07/06/2023
Rep. Nickel, Wiley	[D-NC-13]	07/06/2023
Rep. Pelosi, Nancy	[D-CA-11]	09/14/2023
Rep. Levin, Mike	[D-CA-49]	09/14/2023
Rep. Jacobs, Sara	[D-CA-51]	09/14/2023
Rep. Hayes, Jahana	[D-CT-5]	09/14/2023
Rep. Gallego, Ruben	[D-AZ-3]	01/03/2024
Rep. Evans, Dwight	[D-PA-3]	01/03/2024
Rep. Lieu, Ted	[D-CA-36]	01/03/2024
Rep. Lee, Barbara	[D-CA-12]	01/03/2024
Rep. Ramirez, Delia C.	[D-IL-3]	01/03/2024
Rep. Ocasio-Cortez, Alexandria	[D-NY-14]	02/07/2024
Rep. Porter, Katie	[D-CA-47]	02/07/2024
Rep. Grijalva, Raúl M.	[D-AZ-7]	02/07/2024
Rep. Khanna, Ro	[D-CA-17]	04/12/2024
Rep. Lee, Summer L.	[D-PA-12]	04/12/2024
Rep. Amo, Gabe	[D-RI-1]	04/12/2024
Rep. Tokuda, Jill N.	[D-HI-2]	04/12/2024
Rep. Leger Fernandez, Teresa	[D-NM-3]	04/12/2024
Rep. Barragán, Nanette Diaz	[D-CA-44]	04/12/2024
Rep. Cohen, Steve	[D-TN-9]	09/10/2024
Rep. Thanedar, Shri	[D-MI-13]	09/10/2024
Rep. Balint, Becca	[D-VT-At Large]	09/10/2024
Rep. Landsman, Greg	[D-OH-1]	09/10/2024
Rep. Ryan, Patrick	[D-NY-18]	09/10/2024
Rep. Raskin, Jamie	[D-MD-8]	09/10/2024
Rep. Pallone, Frank	[D-NJ-6]	09/10/2024
Rep. Garcia, Robert	[D-CA-42]	09/10/2024

There are 6 co-sponsors in the Senate.

Representative	Affiliation	Sponsor Date
Sen. Butler, Laphonza R.	[D-CA]*	03/12/2024
Sen. Brown, Sherrod	[D-OH]*	03/12/2024
Sen. Van Hollen, Chris	[D-MD]*	03/12/2024
Sen. Padilla, Alex	[D-CA]	03/14/2024
Sen. Warner, Mark R.	[D-VA]	03/19/2024
Sen. Kaine, Tim	[D-VA]	03/20/2024

Which national housing organizations support the Downpayment Toward Equity Act as stakeholders?

According to the bill fact sheet, stakeholder support for the Downpayment Toward Equity Act includes the following national housing organizations.

National Housing Organization

Americans for Financial Reform Education Fund

Asian Real Estate Association of America

Center for Responsible Lending

Council of State Community Development Agencies

Habitat for Humanity International

Local Initiatives Support Corporation

Mortgage Bankers Association

National ADAPT

National Association of Realtors

National Coalition for Asian Pacific American Community Development (National CAPACD)

National Coalition for the Homeless

National Community Reinvestment Coalition

National Community Stabilization Trust

National Consumer Law Center (on behalf of its low-income clients)

National Council of State Housing Agencies

National Fair Housing Alliance

National Housing Conference

National Housing Law Project

National Housing Resource Center

National NeighborWorks Association

National Rural Housing Coalition

National Urban League

NFCC – National Foundation for Credit Counseling

PolicyLink

Prosperity Now

ROC USA

The Leadership Conference on Civil and Human Rights

UnidosUS

Veterans Association of Real Estate Professionals

Which state and regional housing organizations support the Downpayment Toward Equity Act as stakeholders?

According to the bill fact sheet, stakeholder support for the Downpayment Toward Equity Act includes the following state and regional housing organizations:

State and Regional Housing Organizations

California Reinvestment Coalition

Community Development Network of MD

Housing Action Illinois

Louisiana Fair Housing Action Center

Low Income Investment Fund (LIIF)

Massachusetts Affordable Housing Alliance

Massachusetts Fair Housing Center, Inc.

Neighborhood Housing Services of Los Angeles County

OnTrack WNC

Reinvestment Partners

Southern California Association of Nonprofit Housing

Which local housing organizations support the Downpayment Toward Equity Act as stakeholders?

According to the bill fact sheet, stakeholder support for the Downpayment Toward Equity Act includes the following local housing organizations and initiatives:

Local Housing Organizations

Center for Community Progress

Center for NYC Neighborhoods

Center for Responsible Lending

Community Coalition

Community Housing Development Corporation

Covenant Faith Outreach Ministries / Covenant CDC

EK Sattler Associates

Fair Housing Advocates of Northern California

Grounded Solutions Network

GS Community Ventures

HPP CARES CDE

HomeFree-USA

HomesFund

Hudson County Housing Resource Center

Lawrence CommunityWorks

LeadingAge

Lee County Housing Development Corp

Liberation in a Generation

Lifelines Counseling Services

Long Island Housing Services, Inc.

Los Angeles Homeless Services Authority

Marshall Housing Authority

Piedmont Housing Alliance

RESULTS

ROC USA

SouthFair Community Development Corp.

Spanish Coalition for Housing (SCH)

The Bronx Neighborhood Housing Services CDC Inc

Ventura County Community Development Corporation

WSRAR