The $20K Cash Grant Downpayment Toward Equity Act: Renewed For 2025

Overview: Downpayment Toward Equity Act of 2025

The Downpayment Toward Equity Act of 2025 gives first-time, first-generation home buyers at least $20,000 for a downpayment, or 10 percent of the home's purchase price, whichever is greater. Use our mortgage calculator to see how a larger down payment reduces your monthly payment. Some buyers may qualify for more if they live in high-cost areas or are socially disadvantaged.

The Downpayment Toward Equity Act is designed to help first-time, first-generation buyers overcome barriers to homeownership and narrow the racial and generational homeownership gaps.

Earlier versions of the bill were proposed in 2021 and 2023 but did not pass into law. According to FactCheck.org, only about 4% of bills become law.

This article reviews the 2025 version of the Downpayment Toward Equity Act in detail.

Note: legislation often changes as it moves through Congress, so this page will update as new details emerge. For real-time updates about this and other homebuyer programs, subscribe to our newsletter.

Who Qualifies for the Downpayment Toward Equity Act?

The Downpayment Toward Equity Act of 2025 is a federal grant program that provides downpayment assistance to first-generation, first-time homebuyers. It is not a tax credit. The proposed law provides direct cash assistance to help buyers buy a home.

Here are the main rules:

1. Must be a first-time home buyer

The Downpayment Toward Equity Act defines first-time home buyer as a person who has not owned a home or co-signed on a mortgage loan within the last thirty-six months. Renters who previously owned homes but haven't owned a home in 3 years qualify as first-time home buyers.

Examples of First-Time Home Buyer Eligibility

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

The Downpayment Toward Equity Act defines a first-generation home buyer as someone whose parents or legal guardians have not owned a home in the last 36 months; or, if their parents or legal guardians are no longer living, did not own a home at their date of death.

All parties to the purchase must qualify as first-generation buyers — the home buyer, their spouse or domestic partner, and any other co-borrowers.

The exception is for individuals who previously lived in foster care or institutional care. These buyers qualify automatically, regardless of their parents’ or guardians’ homeownership status.

Examples of First-Generation Home Buyer Eligibility

3. Must earn a moderate income or lower

The Downpayment Toward Equity Act is limited to households with modest incomes compared to their local area. The program uses HUD’s measure of area median income (AMI), which is different in every city and adjusts for household size. The exact cutoff for a family in Denver, Colorado will look different from the cutoff in Omaha, Nebraska.

• In standard cost of living areas, income must be at or below 120% of AMI to qualify
• In high-cost areas, income must be at or below 140% of AMI to qualify

There is no sliding scale. Buyers at or below the limit qualify for the full benefit. Buyers above the limit receive nothing.

Use our Income Limits calculator to see if you earn too much to qualify based on where you live.

Eligibility Based on Income

4. Must use a Conventional, FHA, VA, or USDA mortgage

The Downpayment Toward Equity Act requires buyers to mortgage their home via one of government's official mortgage agencies. Eligible loan types are:

• Conventional mortgages
• FHA mortgages
• VA mortgages
• USDA mortgages

Every other loan type is ineligible including jumbo loans, hard money loans, and other non-QM mortgages.

Reference: Mortgage Eligibility for The Downpayment Toward Equity Act

5. Must buy an eligible property type

The Downpayment Toward Equity Act restricts grant money to homes that will be lived in as the buyer’s primary residence. Eligible properties include:

• Single-family homes
• Townhomes
• Condominiums and co-ops
• Manufactured housing
• Multi-unit properties with up to 4 units, as long as the buyer lives in one of them

Vacation homes, second homes, and investment properties are not eligible. The bill’s language requires buyers to certify that the home will be their main residence.

6. May only use the program once

The Downpayment Toward Equity cash grant can only be used once. If any person on the mortgage — including the primary buyer, co-borrowers, spouse, or domestic partner — has already received the grant, the household is ineligible to use it again.

One-Time Use Rule for the Downpayment Toward Equity Act

7. Must complete a homeownership education course

The Downpayment Toward Equity Act requires buyers to complete a homeownership education program prior to closing. The program must be provided by a HUD-approved housing counseling agency, either in person, online, by phone, or another format approved by HUD.

Fannie Mae offers a free course called HomeView, and Freddie Mac offers a free course called CreditSmart Homebuyer U. Both classes meet the Downpayment Toward Equity Act requirement.

An approved homeownership education course will cover the financial responsibilities of homeownership, fair housing rights, and the availability of post-purchase counseling.

At least 5 percent of all program funds are reserved to pay for homeownership counseling and education. This guarantees that the required classes are available to every eligible buyer at no cost.

Approved Education Formats

How Does the Downpayment Toward Equity Act Work?

The standard cash award for first-time, first-generation home buyers is the greater of $20,000 dollars or ten percent of the home’s purchase price. The maximum amount may be increased for socially and economically disadvantaged buyers and for buyers in high-cost areas.

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." These buyers must also meet the income limits tied to their local area median income.

Eligible home buyers can use the money for anything related to purchasing a home.

For example, a cash grant can be split into a down payment, a lump sum for closing costs, and cash to buy down the 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 grant money to make accessibility renovations to your home.

Eligible Uses of Grant Funds

Grant Amounts and Eligibility for Increased Awards

Some buyers could receive more than $20,000 in downpayment assistance.

The Downpayment Toward Equity Act guarantees at least $20,000 in downpayment help, or 10 percent of the home’s purchase price, whichever is greater.

Buyers who qualify as socially and economically disadvantaged may be eligible for the larger award. Earlier versions of the bill set the additional amount at $5,000, which is why it was often called “The Downpayment Toward Equity Act.” The current version of the bill gives HUD authority to increase the grant amount for these households but does not specify by how much.

So who qualifies as socially disadvantaged? The bill defines these individuals as people who have faced racial or ethnic prejudice or cultural bias because of their identity, regardless of personal qualities. The law presumes that people identifying as Black, Hispanic, Native American, or Asian American fall into this category, but it also allows others to qualify if they can show evidence of similar barriers. These buyers must also meet the same income limits tied to their local area median income (AMI).

In short, disadvantaged buyers are guaranteed the standard grant of $20,000 or 10 percent of the home price, and may receive more once HUD issues regulations after the bill becomes law.

Grant Amounts by Buyer Type

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 as a primary residence for five years. If the buyer sells the home or stops living in it within 60 months, they must repay a portion of the grant they received.

• Sell or move within Year 1: Repay 100% of the grant
• Sell or move within Year 2: Repay 80% of the grant
• Sell or move within Year 3: Repay 60% of the grant
• Sell or move within Year 4: Repay 40% of the grant
• Sell or move within Year 5: Repay 20% of the grant
• Stay 5 years or longer: Repay 0%

There are exceptions for hardship situations, such as job relocation, divorce, military deployment, or selling at a loss. In those cases, repayment may be reduced or waived.

Repayment Example (Grant = $20,000)

How Soon Could Home Buyers See Money?

Compared to other first-time buyer bills, such as the First-Time Homebuyer Tax Credit Act, the Downpayment Toward Equity Act has more moving parts.

Cash grants require coordination among several levels of government. Once passed, Congress must write rules for how the federal government distributes funds to state agencies, and how state governments pass money down to local title companies where home buyers actually close on their loans.

The Act also directs HUD to set up rules for privacy protection and reporting, which adds another step to implementation.

As a result, there could be a significant gap between the day the Downpayment Toward Equity Act becomes law and the day the first U.S. home buyer actually receives a grant.

Who Sponsors and Supports the Downpayment Toward Equity Act?

The Downpayment Toward Equity Act of 2025 is sponsored by Rep. Maxine Waters (D-CA-43) in the House of Representatives and Sen. Raphael Warnock (D-GA) in the Senate. Both lawmakers have introduced similar bills in past sessions of Congress, with support continuing to grow over time.

The bill also has broad support from housing, lending, and civil rights groups. Sponsors emphasize that the Act is backed by a wide coalition — including mortgage industry associations, nonprofit housing groups, and community development organizations — all aligned around expanding homeownership opportunities.

Key supporters include the Mortgage Bankers Association, the National Association of Realtors, and Habitat for Humanity.