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

First-time home buyers may be eligible to receive a $25,000 cash grant to purchase a new home.

The first-time buyer program, called The Downpayment Toward Equity Act of 2023, fulfills a Biden Administration campaign promise: To give Americans down payment assistance for purchasing quality housing.

First introduced as the Downpayment Toward Equity Act of 2021, the bill expired in the last congressional session. Then, in early-2023, after President Biden’s 2024 budget proposal earmarked $100 billion for a homebuyer cash grant program, the first-time buyer bill was reborn.

On June 21, 2023, elected officials re-introduced the $25,000 cash grant for home buyers bill as H.R. 4231: The Downpayment Toward Equity Act of 2023.

The Downpayment Toward Equity Act’s purpose is “to provide downpayment assistance to first-generation homebuyers to address multigenerational inequities in access to homeownership and to narrow and ultimately close the racial homeownership gap in the United States, and for other purposes.”

In plain language: the government wants to help close racial wealth and homeownership gaps by giving cash grants to first-time, first-generation homebuyers.

This article simplifies the Downpayment Toward Equity Act to show which first-time buyers qualify, how to get your cash grant, and when to expect the bill to be passed into law.

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What Is The Program’s Current Status?

As of December 6, 2023, the $25,000 first-time home buyer grant program is a bill with the 2023-2024 Congress. The bill replaces the Downpayment Toward Equity Act of 2021 (H.R. 4495) bill which expired at the end of the last congressional session.

Home buyers are unable to claim the bill’s $25,000 grant because the bill is not law.

Rep. Maxine Waters authored the former and current versions of The Downpayment Toward Equity Act in the House of Representatives. Senator Raphael Warnock authored the bill’s Senate version in the last Congress.

Senator Warnock has yet to re-introduce the bill for the Senate.

The Downpayment Toward Equity Act timeline is as follows:

• 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

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.

Apply for the Conventional 100 mortgage here.

What is the Downpayment Toward Equity Act of 2023?

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 December 6, 2023, 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.

Get pre-approved to see if you qualify.

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 also reduces 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 levels the playing field for disadvantaged groups. It’s the most powerful piece of housing legislation since 1968’s Fair Housing Act and Housing & Urban Development Act.

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

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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 December 6, 2023, the Downpayment Toward Equity Act of 2023 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 that’s 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.

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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 of 2023 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.

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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.

Click here to get pre-approved.

Will the Downpayment Towards Equity Act Become Law?

The Downpayment Toward Equity Act is unlikely to pass into law before the late-2023 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.

Representative Maxine Walters introduced The Downpayment Toward Equity Act of 2023 on June 21, 2023, as H.R. 4231. There is no corresponding bill in the Senate yet.

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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 version 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 was a campaign trail talking point that later moved into a bill titled The First-Time Homebuyer Act. The tax credit bill gives first-time home buyers a $15,000 tax credit to from the IRS.

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

Is the Downpayment Toward Equity Act different from the American Dream Downpayment Act?

Yes. The American Dream Downpayment Act is a program that sets up tax-advantaged savings accounts to use towards down payment costs.

Is the $25,000 Home Buyer Grant passed?

No, the $25,000 first-time home buyer grant program is not passed into law. Homebuyer.com expects the bill will pass in some form before the end of 2023. It will not be passed retroactively. To get updates on the bill when it passes, get a mortgage pre-approval started.

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 expense.

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 first-time home buyer qualifications.

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

Yes, you may use grant funds for a down payment on a home, paying closing costs, reducing your mortgage interest rate, and other home purchase-related expenses.

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 to pass into law as early as mid-2023.

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, and more.

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

The primary sponsor of H.R. 4231 in the 118th Congress is Rep. Maxine Waters (D-CA-43).

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

As of December 6, 2023, there are 35 co-sponsors of H.R. 4231 in the 118th Congress. The co-sponsors of the Downpayment Toward Act are Rep. Nancy Pelosi (D-CA-11), Rep. Salud O. Carbajal (D-CA-24), Rep. Adam B. Schiff (D-CA-30), Rep. Jimmy Gomez (D-CA-34), Rep. Sydney Kamlager-Dove (D-CA-37), Rep. Mike Levin (D-CA-49), Rep. Sara Jacobs (D-CA-51), Rep. Juan Vargas (D-CA-52), Rep. Jahana Hayes (D-CT-5), Del. Eleanor Holmes Norton (D-DC-At Large), Rep. Brittany Pettersen (D-CO-7), Rep. Henry C. “Hank,” Jr. Johnson (D-GA-4), Rep. Nikema Williams (D-GA-5), Rep. Morgan McGarvey (D-KY-3), Rep. Jonathan L. Jackson (D-IL-1), Rep. James P. McGovern (D-MA-2), Rep. Ayanna Pressley (D-MA-7), Rep. Rashida Tlaib (D-MI-12), Rep. Ilhan Omar (D-MN-5), Rep. Steven Horsford (D-NV-4), Wiley Nickel (D-NC-13), Rep. Joyce Beatty (D-OH-3), Rep. Suzanne Bonamici (D-OR-1), Rep. Mary Gay Scanlon (D-PA-5), Rep. Al Green (D-TX-9), Rep. Sylvia R. Garcia (D-TX-29), Rep. Jasmine Crockett (D-TX-30), Gregory W. Meeks (D-NY-5), Rep. Grace Meng (D-NY-6), Rep. Ritchie Torres (D-NY-15), Rep. Mark Pocan (D-WI-2), Rep. Gwen Moore (D-WI-4), Rep. Adam Smith (D-WA-9)

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: 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: 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: 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.

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